New Year, New Rules, New You?
There is an old saying: if you took all the economists in the world and laid them head-to-toe, they still couldn’t reach a conclusion. No doubt this line has been borne out of frustration as we struggle to come to terms with an uncertain world and conflicting advice.
As houses are becoming over-priced, are they likely to improve in value in the mid term? Is Australia’s recent economy strength likely to suffer as the US “hits the wall”? Will the Aussie share market stabilise? Will fuel prices settle down towards late 2008, or continue to climb above $2.00 per litre. If so, when? The fact is we don’t know. So with all these questions unanswered, what DO we know?
We DO know that we’re into another new financial year so it is a golden opportunity to wipe the slate clean and become financially fit. The first step is to create a financial plan and stick to it. Create short and long term financial goals, be serious about conquering your financial issues and remember a crucial yet simple rule, spend less than you earn.
Over estimate your expenditure for the next 12 months, differentiate “wants” and “needs” in order to help you stay focused and concentrate on achieving your short and long term financial goals.
We DO know that if you save, or better still invest, the Federal Government’s new tax-cuts, you are going to be much better off. In fact, according to modelling conducted by AMP, some people may retire with an extra $143,675, if they direct their tax cuts into superannuation. If you are eligible, don’t forget the Government Super Co-contribution. By directing money into your super the Government will reward you by adding up to another $1,500 to your nest egg. Super is one of the most tax effective ways to save for retirement and it’s never too late to start building those savings.
We DO know that the fundamental laws of supply and demand will ultimately determine the value of anything, including your investments. No one expects you to be happy when your investments are falling in value, but the volatility you may now be experiencing was expected and will occur again every so often throughout your life. Take a long term view and ride it out – this will help you sleep better at night.
Generally speaking, if your plans are soundly based, with an appropriate time frame in mind, and have been reviewed regularly, you will be more comfortable with your financial position and you’ll be looking forward, not back.
If you don’t have a plan, maybe now is the time to think about getting one?
Peter Lake is an Authorised Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 (AMPFP), AFS Licence No. 232706. Any advice contained in this document is of a general nature only and does not constitute personal financial product advice. In preparing the advice no account was taken of the objectives, financial situation or needs of any particular person. Therefore, before making any decision, readers should consider the appropriateness of the advice with regard to their particular objectives, financial situation and needs.
