It’s nearly the end of the year and whether or not your finances are in good shape, it’s still important to review your finances and make a fair determination of how you can improve your financial well-being before moving into the new year.
Preenay Sathu, Channel Head at FNB Financial Advisory, says “The end of the year should not be the only time to relook finances, it must be an ongoing process. However, conducting a reassessment of your financial status over a 12 month period provides a clear picture of where you are and can help spot any gaps or mistakes that may need correcting. After this step it becomes easier to set new financial goals and targets over the coming year. Discipline in this process is paramount as the most effective way to achieve results is being able to set goals and stick to them.”
Here are some areas to look at for the coming year:
Change your spending habits
A change in financial behaviour goes a long way. Make a list of items that are not priority for you and yet they dent your wallet. This, for example, may include downgrading on the type of vehicle you drive so that you can allocate more funds towards your retirement or other savings goals. By being more conscious of your spending habits you will be in a better position to make changes where necessary and avoid making the same mistakes.
Beat the debt trap
This is easier said than done, but it can be achieved and the first step is to avoid taking on more debt, instead focus on managing the current debt burden. Only borrow when you need to and avoid falling for the temptation of what lenders offer you. Rather focus on reducing debt and using any surplus cash to increase payment towards your home loan or saving for your child’s education.
Relook your investment portfolio
Review your investments to see if you have asset classes that provide a good mix of exposure to growth, protection and preservation strategies. That will allow you to maximise any opportunities to achieve your goals over time. Any adjustments that are made should be informed by your risk appetite and long-term investment objectives. Diversification remains key; your portfolio should have a balanced spread across equities, bonds and cash instruments; this may vary depending on personal circumstances and goals.
It may be worthwhile to assess your portfolio performance; however, short –term market shocks should not be used as a reason to make adjustments that could have a lasting impact. This is a task that may need to be done in consultation with a qualified financial adviser.
Reassess your retirement contributions and savings
Review your retirement plan, contributions to your retirement fund and other associated savings as it becomes much more critical as we move closer to the golden years. Check with your financial adviser if the annual premium increase is in place and sufficient to meet your goals at retirement. It is also beneficial to assess if you are maximising the tax benefits available to you by virtue of your contributions to retirement funds i.e. pension funds; provident funds and retirement annuities are being fully utilised.
Ensure your estate is in order
Review your will and ensure it serves the best interest of your dependents and protects your assets. It is important to remember that an estate that is well planned and articulated through your will be quicker to execute and not be subjected to unnecessary delays.
“Be realistic with the financial goals that you set for yourself as there are many external forces in the broader economic environment that may have an impact on your finances,” adds Sathu.
