1. Get Started Today
If you spent much of 2012 in denial or ignoring what you know you needed to do financially, don’t be embarrassed; you had plenty of company. The best way to come to grips with your financial future is to review your financial plan.
If you don’t already have one, make a plan. You’ll want to analyze your asset base, your earning potential, and your spending. Most importantly, you’ll want to review your goals. Are they still attainable, or even reasonable?
You can do it yourself, but a professional financial planner has the knowledge and the tools to calculate what it will take to reach your goals while helping you manage your finances along the way to help you get there.
2. Spend Less. Save More.
The best way to provide — or recoup — the money you will need in the future is to save more now.
Create a budget today. Keep it and review it. If you need help to manage money see a financial planner that offers this service at low cost or part of a package.
3. Keep an Eye out for Loan Deals
With interest rates at all-time lows, it’s a good time to explore if refinancing makes sense. You may find it financial preferable to refinance. Don’t do this just to reduce your loan repayments today though- this could become negative for you long term. Do this as part of a long term strategy.
4. Reassessment
The last 5 years has seen all asset values decline- property , shares which impacts on super. Reassess your long term goals and in particular retirement is very important. Ensure your assets and their growing value will be able to meet what your goals are.
5. Keep Up your Contributions to Super or Investment Plans
I have heard many times that, ‘I stopped my contributions to super because I put in $5,000 and the fund balance was still the same, so I lost $5,000. This generally is not the case. What has occurred in most cases is you have purchased investment fund units at a lower price during that year. When the unit price rises to previous value you will see the gains. This is called dollar cost averaging and is a very effective way to create wealth.
6. Keep Your Cool
I remember in Feb March 2009 comments like, “It’s the end of capitalism, it will never recover.” Just like comments from July 2007, “These times will never end, property and shares both rise in same year, banks are giving away money- no better time to borrow to invest.” Or December 2011 – “Europe is broken and will bring the rest of the world down with it.” Interestingly, the behavior of investors should be the opposite to the rhetoric being thrown around at those times.
Be prudent but don’t panic and don’t be over enthused by media rhetoric.
Today is the time to re-assess and consider growth assets again. In saying this we believe that: growth will be slower. QEs and zero-based interest rates have negative consequences. Move money to currencies and asset markets in countries with less debt and less hyperbolic credit systems. Australia, Brazil, Mexico, Canada and Asia. Equities and other assets. As always diversify.
7. See a Financial Planner
Financial planners can help you navigate your way through these perilous economic times. No one knows what the future will bring, but a good planner can provide the kind of experience and objectivity that can bring clarity to difficult financial decisions.
If you have a financial planner, and you haven’t updated your plan in light of recent economic realities, it makes sense to check if you’re still on track, or if there are course-corrections you could make to improve the situation.
