The holiday break may have provided an ideal environment away from the usual day-today distractions to think about practical ways to improve your personal finances over the next 12 months and beyond.
One way to begin your personal finance housekeeping is to take a clean sheet of paper – or set up a new document on your computer – and jot down a few pointers or resolutions for 2016 and well into the future.
Here are a few starters to consider and to perhaps discuss with your financial planner early in the New Year:
- Get your savings and investment fundamentals in shape. These fundamentals include developing (or revising) suitable saving and budgeting plans to work towards your goals, setting an appropriate long-term or strategic asset allocation for portfolio and minimising your investment costs. And resolve to keep emotions out of your investment decisions by focusing on your long-term goals and on your strategic asset allocation – without becoming swayed by the latest bout of “noise” in the markets.
- Check the state of your retirement savings. Are your savings on track to finance your intended standard of living in retirement or should you step-up your super contributions if possible? (See following points regarding salary-sacrificed contributions and transition-to-retirement pensions.) Keep in mind that superannuation retirement calculators, such as Vanguard’s version, can provide a valuable insight into how much retirement income your super savings may produce.
- Check if can make higher voluntary concessional (salary-sacrificed or personally-deductible) super contributions without exceeding your annual contributions cap? For 2015-16, the concessional contributions cap is $30,000 for members under 49 at the beginning of the financial year or $35,000 for members aged 49 or older. Don’t overlook that the concessional contributions cap includes compulsory contributions. (Concessional contributions are taxed at 15 per cent rather than marginal tax rates while earnings within a super fund are concessionally taxed.)
- Check whether you become eligible for a transition-to-retirement pension in 2015-16. These are designed so that those who have reached their superannuation preservation age (at least 56 if born after July 1960) and are still working can receive a super pension. (Earnings of super fund assets backing the payment of a super pension are not taxed while super pension payments are no longer taxable once members reach 60.) Some fund members choose to re-contribute at least part of their transition-to-retirement pensions as part of a saving strategy.
It is worth emphasising that these suggested points to begin your financial housekeeping exercise have nothing to do with trying to predict what may or may not happen on investment markets.
Whenever you feel an urge to take decisive action during particularly volatile markets, it can be a time to undertake a little investment housekeeping rather than trying to time the sharemarket – attempting to pick the best times to sell or buy.
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Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment. |
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