5 tips for financial success in the new year

As we welcome the new year, it’s the perfect time to reflect on our financial goals and ensure we’re on the right track. This article is not only a timely reminder for you but also a valuable guide to share with your children, friends, or anyone who doesn’t yet work with a financial adviser. These practical tips offer a solid foundation for making smart financial decisions and setting up a successful year ahead.

Set clear financial goals

Financial planning begins with setting clear goals, short-term, medium-term, and long-term. Short‑term goals might include creating a spending plan, reducing debt, and building an emergency fund. Medium‑term goals may involve reviewing insurance coverage and making further progress on debt reduction. Long‑term goals focus on broader financial wellbeing, such as planning for retirement, downsizing or relocating, becoming debt‑free, or leaving an inheritance or legacy for your children.

Start by identifying what you want to achieve financially this year. Be specific about your goals, whether it’s saving for a house deposit, paying off a credit card, or building an emergency fund. Use the S.M.A.R.T framework to make your goals Specific, Measurable, Achievable, Relevant, and Time-bound. Break these goals into smaller, measurable steps and set a timeline to keep yourself accountable.

Create a spending plan

A spending plan is a cornerstone of financial success. Track your income and expenses to understand where your money is going. Categorise your spending into needs, wants, and savings, and allocate your income accordingly. Tools like spending plan apps or spreadsheets can make this process more manageable.

When creating your spending plan, consider:

• Fixed vs Variable Expenses: Identify fixed expenses such as rent and utilities, as well as variable expenses like groceries and entertainment. Also, be mindful of irregular or annual expenses. Plan for items such as insurance premiums, car registration, holidays, and gifts so they don’t derail your budget.
• Debt Repayment: Allocate a portion of your income to pay down high-interest debt.
• Savings Goals: Include savings as a non-negotiable expense in your spending plan.
• Lifestyle Adjustments: Look for areas where you can reduce spending without sacrificing your quality of life, like dining out less often or finding cheaper alternatives for daily expenses.

Revisit your spending plan regularly to adjust for changes in income or expenses. Flexibility is key to staying on track.

Build an emergency fund

Life is unpredictable, and having a financial safety net can save you from unnecessary stress. What will you do if you encounter an unexpected expense or loss of income? Having money set aside can help you create a financial safety net, and knowing it’s there can do wonders for your peace of mind. Aim to save three to six months’ worth of living expenses.

Start small by setting short‑term savings goals and practising regular saving each week or month. Keep these funds in a separate, easily accessible savings account, and before long you’ll start to see real progress. For longer‑term goals, aim to build an emergency fund with at least three months’ worth of living expenses. Make saving even easier by paying yourself first through direct deposit or an automatic transfer. Every little bit helps.

It’s also important to consider how stable your income is. If your income varies or depends on bonuses or commissions, you may need to aim for the higher end of the three‑to‑six‑month emergency savings range.

Invest in your financial education

The more you know about managing money, the better equipped you’ll be to make informed decisions. Take the time to read books, listen to podcasts, or attend workshops on personal finance. Understanding concepts like compound interest, investment options, and tax strategies can have a significant impact on your long-term wealth. Financial literacy empowers you to take control of your financial future and avoid common pitfalls, such as falling into high-interest debt or making poorly informed investment choices.

Make learning engaging and relevant by focusing on areas that align with your goals. For instance, if you’re planning to buy a property, learn about mortgages and property market trends. If retirement planning is a priority, delve into superannuation strategies and long-term investment vehicles. Additionally, consider joining online forums or groups where you can exchange ideas and learn from others’ experiences.

Work with a financial adviser to create, review, and adjust your plan

Achieving financial success isn’t a one-time effort—it’s an ongoing process that requires regular reviews and adjustments. Your financial adviser provides valuable insights and ensures your financial plan stays aligned with your evolving life circumstances and goals.

”I see my clients experience all kinds of life events, including career changes, growing families, property decisions, and shifts in market conditions. All these factors can influence their financial plan, and ongoing advice ensures their strategy adapts as their circumstances evolve.”

Happy New Year!