Ready to dive headfirst into the new financial year? It’s a great time to determine what your goals are for the coming year and if there are any aspects of your finances that need some attention. If you’re wondering how to plan your life financially or are simply looking for some tips on how to update your current financial year plan, our handy guide has you covered.
As you welcome the new financial year, it’s a good idea to evaluate your current financial situation. You may choose to do this in many ways, but one of the simplest is to list out your assets, your debts, and any other important financial considerations. The information you gather at this time can help you determine which areas of your finances require urgent attention, those you may need to attend to in the near future, and any that may be worth addressing in the long term. If you have a lot of debt, it may be a good signal to reduce the amount you owe, while healthy bank balances can mean that your savings goals are on track. Even if you haven’t undertaken any form of financial year planning before, knowing the current state of your finances can be incredibly valuable.
Setting financial planning goals can be very helpful, but it’s also important to evaluate them from time to time. The start of a new financial year is a good time to look back on the goals you were able to achieve as well as those that you weren’t quite so successful in completing. Take stock of what you did achieve and set aside some time to think about why you may not have completed others. This information could help you discover flaws in your planning process, allow you to assess the budget you’re using or simply allow you to reevaluate your current goals.
What if you don’t already have financial planning goals?
If you’re new to financial planning, a good place to start is defining your financial goals for the year ahead. When you are setting goals, look to use the SMART methodology which helps you to outline each goal and what needs to be done to accomplish them. Your goals should be specific, measurable, achievable, realistic and timed. If looking at a list of goals feels overwhelming, it can also be helpful to categorise them into short-term goals, mid-term goals and long-term goals. Knowing which goals are time-sensitive can help you prioritise them, while longer-term goals might be something to work towards over several years.
Depending on your current and future financial goals, it may be worth checking whether your current budgeting strategy is still working for you. If you’re not reaching your savings goals or are struggling to pay your monthly expenses even though you should be able to afford them, the method that you’re using may not necessarily be the best fit. It may pay to explore some other options that may be better suited to your current situation. As with most financial planning tools, you can always adjust your budget in the future if your circumstances or goals do change.
What if you haven’t used a budget before?
If you’re yet to establish a budget, the new financial year is a good time to set one up. There are plenty of different options to choose from, from bucketing your income into savings, regular expenses and spending money, to detailed strategies that account for every dollar. It’s well worth doing your research to find an option that appeals to you and that you think you can successfully introduce to your day-to-day life. Don’t be afraid to try out a few different budgeting strategies to find the best fit for you and your financial goals.
Over time, our saving goals can grow or change depending on our circumstances and what we consider to be most important to us. While you may have primarily focused on shorter-term goals in the past, such as saving for holidays overseas, your focus may now be on long-term goals, including saving for a house or your retirement. When working on your financial planning goals for the coming year, think about whether your existing saving goals still apply or whether you should consider building new goals.
What if you don’t have saving goals?
If you don’t already have saving goals, there’s no time like the present to create some. Think about what you’d like to achieve financially in the short-term, mid-term and long-term, and start to build out some goals you can work towards. If you’ve struggled to save in the past, you might consider starting small, with a few dollars a week, before slowly increasing the amount that you feel comfortable saving. For some quick wins, you could look at your regular expenses and consider reducing some that may not be essential, whether that be a takeaway coffee each morning or a streaming subscription that you aren’t getting much use of.
It’s great to be able to define your financial goals and map out how you’ll reach them, but it’s also important to prepare yourself financially for the unexpected. If COVID-19 has taught us anything, it’s that our employment and financial situations can change far quicker than we may have previously thought. To help prepare yourself for any financial situation, whether that be an unexpected bill, the loss of a job or unplanned medical expenses, it’s a good idea to incorporate an emergency savings fund into your financial plan. If you already have an emergency savings fund, use the start of the new financial year as an opportunity to check whether the amount you have saved is still suited to your current circumstances.
What if you don’t have an emergency savings fund?
If you don’t already have an emergency savings fund, consider building one over the coming financial year. Although advice varies, many recommend having a balance that’s equivalent to somewhere between three and six months of your regular expenses, including rent or mortgage repayments, utility bills, car expenses, food costs and other essentials.
Although it’s not something that you’re likely to think about every day, your superannuation is another important consideration to have when developing your financial year plan. You may not be thinking about retiring any time soon, but it’s important to get your superannuation balance into shape as soon as you can. The actions that you take now can benefit you once it comes time to retire.
What if you haven’t paid your superannuation much attention in the past?
If you were wanting to boost your superannuation balance, you might consider salary sacrificing, making regular voluntary contributions or investigating the benefits of other superannuation funds, whether they be higher returns or lower fees. Seeking the help of a financial advisor or a superannuation specialist can be helpful for understanding where you stand now and what actions you can take to help your nest egg grow.