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The new year is a time when we often hear others speak about their new year’s resolutions and our TV airways are flooded with commercials for losing weight or giving up smoking. Why not try something a little different this year? Get a clear vision for your financial future in 2020 instead. It’s a New Year’s resolution that you will not only thank yourself for, but something that will directly benefit your family and their future as well. Having your finances sorted can help give you more choices for how you live your life both now and in retirement.
There are some important steps you need to take to achieve a clear vision for your future in 2020. They include:
Set Your Goals
Many people live day to day, week to week, without thinking of the future. These people often find themselves at the cusp of retirement realising that they will not be able to continue their current standard of living. This is not a fun place to be and can cause a lot of stress and uncertainty. Having a goal and a plan for your financial future can help alleviate stress both now and in the future.
Choosing your goals or knowing where you want to end up is a crucial part of setting your financial vision. They help lay the steppingstones to success. When it comes to our financial lives, common goals are often “save for a house deposit”, “get out of debt”, “sort out my super”, “save for retirement” or “pay for the kids education”. These are all fantastic goals. What is important to look at is what type of lifestyle aspirations you want to achieve. Everyone has different goals and that is ok. You need to look at what makes you happy and what will provide you with a fulfilling life. Travelling around Australia in a caravan might sound like some sort of cruel and unusual punishment to you but a life’s goal to someone else. Money doesn’t buy happiness, but the unfortunate reality is that it does buy choices and choices are something that you want at all stages of life.
Make Your Goals Measurable
It is fantastic to have a goal, but what gives them more power is to quantify them. By making your goals quantifiable they are measurable.
Instead of “I want to get out of debt” quantify it – “I want to pay off my $12,000 credit card debt in the next 2 years”.
Instead of “I want to save for retirement” quantify it – “I want to have $70,000 a year to live off in retirement”.
Instead of “I want to pay for my child’s education” quantify it – “I want to save $100,000 over the next 7 years to pay for children’s higher education”.
Measurable goals also enable you to be able to break them down into smaller “bite size” pieces or steps. In the credit card example, you could then look at what you need to pay off each month to reach your goal.
Get Help Making Your Plan
Get advice from an expert. We often think that we can manage our finances alone, but the research shows that those who get financial advice do better than those who don’t. In a 2018 study ‘Value of Advice’ by Core Data it was found that everyday Australians who received financial advice confirmed that it added tangible value to their assets in retirement as well as peace of mind. An experienced financial planner can advise you on the decisions you need to make to reach your goals. A holistic adviser will tailor a plan which would incorporate advice on superannuation, wealth creation, personal insurance, debt management, budgeting, property strategies and estate planning. It is the role of a good financial planner to help you achieve your goals, those that are important to you. An ongoing relationship with a financial adviser can give you peace of mind that you are on track to achieving your goals.
Financial advisers can help give you a clear vision for the future. They can use forecasting software that can give you a clear picture of the financial future you could have. They can predict how much income you will have in retirement on your current trajectory and if you make changes or additional contribution to superannuation. They can advise you on strategies to pay down your debt faster. They can help you make informed decisions about which debt you should focus on first.
Use this calculator to give you an idea of how much money you will have in retirement. Will it be enough to live on?
Protect what is important to you
An important part of having a clear financial vision is knowing that you and your family are protected if something was to happen to you. Australians are good at insuring their house and car, but they seem to miss the fact that their greatest asset is really their ability to earn an income. If this ability was taken away how would you support your family? Personal insurance can protect your income earning ability and provide security for the future. Some people think that they can’t afford personal insurance, but many can be paid for through superannuation. Not all insurance policies are the same, so it is important to get expert advice to know that you are effectively covered in the event of a life changing incident or illness.
The information within, including tax, does not consider your personal circumstances and is general advice only. It has been prepared without taking into account any of your individual objectives, financial solutions or needs. Before acting on this information you should consider its appropriateness, having regard to your own objectives, financial situation and needs. You should read the relevant Product Disclosure Statements and seek personal advice from a qualified financial adviser. The views expressed in this publication are solely those of the author; they are not reflective or indicative of licensee’s position and are not to be attributed to the licensee. They cannot be reproduced in any form without the express written consent of the author. Elliot Watson Financial Planning Pty Ltd and its advisers are Authorised Representatives of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.