As the festive season hangover begins to fade, nows the time to start planning ahead for the next 12 months. Here are the essential areas to focus on to ensure your financial future will be one of health, wealth and happiness, writes David Potts.
Gosh, time flies when your savings are shrinking. Its amazing how quickly 2013 has crept up, but think of it this way: its still only halfway through the financial year.
Besides, there will be a lot of changes in the new year, some that we know about and no doubt others we dont.
So here are 10 top tips for the New Year from an old hand.
1. A super plan
This will be a big year for super ... on second thoughts, make that a small year, because the most you can salary sacrifice is $25,000.
The Cooper reports showcase reform, the low-fee MySuper option that your boss must put you in if you cant be bothered choosing a fund, officially starts on July 1.
Only it wont. If youre already in the default super fund, which is to say you expect to be in the same job on July 1, your compulsory contributions wont go into MySuper until January 1, 2014.
Since you wont be transferred to the new MySuper fully until July 1, 2017 nothing happens quickly in the convoluted world of super youll have two funds and two lots of fees to pay.
Thatll teach you for not taking an interest. Anyway, look on the bright side, which is that lower fees make a huge difference over time, which could be 40 years away.
Even before MySuper starts, there are cheap, perfectly good funds around. BT has one, and check out any industry fund. While on the subject of super, and this will only take a sec, there are other ways of getting in than salary sacrificing.
The co-contribution scheme is a doozy. If you or your partner have at least a part-time job and earn up to $31,920 a year, the government will contribute a dollar for every one you put in, up to $1000.
The government will contribute as far as $61,920, suitably reduced. Even voluntary contributions not a tax break in sight can pay. Their income will be taxed at only 15 per cent and not at all when you start a pension. Ah, something to look forward to.
2. Repay debt
Its great youre getting your debt down, but theres no point paying more off the mortgage only to run up a credit-card balance. In the debt stakes, always pay off whatever has the highest interest rate, and that probably wont be the mortgage.
Nor is there any gain from saving more when you could be paying off more of the mortgage. Why not do both? The trick is an offset account attached to your mortgage. Money parked there is like paying off the mortgage, and is tax free, but you can get it back in an emergency.
Use it as emergency cash only, a partner at HLB Mann Judd, Jonathan Philpot, says. I like the forced saving discipline of paying down the mortgage every six months. If you dont have an offset account, a redraw facility will do, though there may be extra fees.
Then there are the credit-card Christmas specials, which let you transfer your balance with no interest charged. Six months not paying interest (as long as you dont use the card) is a great way to get stuck into the debt.
As rates drop, you need to squeeze the most out of your savings. Online at-call accounts are still offering the best rates. If you have reasonable savings, though, perhaps put some in a term deposit as a hedge against falling rates. A cocktail of maturities is best so you still have some flexibility, and they should average out so youre not left on a low rate for years.
But dont forget, the best way to save is the mortgage offset account its a higher rate, tax free.
You should review your shareholdings every year, and may as well do it now so you dont forget.
Re-balancing is what advisers call selling some of one stock and buying more of another if theyve moved out of kilter.
So if one stock has shot up, you take some profits by selling some of your holding and buying more of one that hasnt moved or even dropped, as long as youre still happy it will be a good investment.
With brokerage so low, you can afford to buy or sell in dribs and drabs and youre not trying to time the market, which is impossible.
5. Pay yourself
Expenses expand to fit the income available. Or exceed it. So the best hope you have of saving is to treat it as an expense as well. Then you have no choice, do you?
A rule of thumb is to whisk as close to 10 per cent as you can of each pay into a savings account without starving or reverting to the credit card.
Just to be sure, set up a direct debit so you never get your mitts on it.
This brings me to your expenses. Promise, Ill be brief.
The good news is that once you know where your moneys going, budgeting isnt so painful.
Frankly, youll be surprised how much youre frittering away.
But the only way youre going to find out is by keeping a record of everything spent for two weeks there has to be an app somewhere to help.
Then youll see how few changes you really need to make the budget stretch further.
7. Check the mortgage
Unless youre paying at least 0.5 per cent less than a banks advertised home-loan rate, youre being ripped off. The banks are offering discounts for the asking and there are loans out there charging less than 6 per cent check out canstar.com.au or ask a mortgage broker.
Should you fix?
Yes, some of it, especially if you can fix at or below what youre already paying.
To have more certainty of fixing it all, youll need to weigh up the likelihood of more cuts next year and the loss of flexibility against the fact this is about as low as fixed rates will go.
Its in the lenders interest, so to speak, to offer the best deal when rates are falling, not rising. Ill leave it to you.
8. Get advice
Or you could ask a professional. Theres less chance youll be flogged a fund you dont need after July 1 when commissions paid to financial advisers are banned.
Then by law theyll have to act in your best interests, though theres no rule against dud advice.
Big dealer groups such as banks will still push their own products, warns the managing director of Sentinel Wealth, Justin Hooper.
Successful people surround themselves with good advisers, and the value of good financial advice is so high that its worth putting in the effort to find one who will be fully aligned with your interests, he says.
Near retirement you need to get advice anyway the super and Centrelink rules are so complicated, having an expert negotiate your way through them will be well worth the money.
Start collecting those receipts and thinking about the tax implications of your investments.
Hiding in bank savings accounts or term deposits isnt getting you ahead in real terms. What inflation doesnt take out, tax will.
The two best government-sanctioned ways of avoiding tax are super and franked dividends from shares.
If youre saving to buy your first home, an even better option is the First Home Saver Account scheme (although offered by credit unions and building societies, theyre every bit as safe as banks), where the government gives you $1020 if you save $6000.
Also, the interest is taxed at a flat 17 per cent. However, conditions apply, as they say on TV.
The higher tax-free threshold this year of $18,200 (or $20,542 with the low-income offset) also offers income-splitting opportunities for a couple all the better if one partner isnt earning anything.
Dont put all your eggs in one basket. But how many baskets should you have?
Just because you have a few different stocks doesnt mean youre diversified.
Same goes for owning a home and having an investment property.
Remember, the whole point of diversification is financial safety.
The bigger picture is how much you should have in the sharemarket, or any other asset, to begin with.
That depends on where youre at in life young and starting out, you can afford to take risks and should pile into growth assets such as shares or property. Close to retirement, you need more cash and conservative investments such as bonds.