Taking control of your finances in 2021

January 14th 2021 | Categories: Financial Planning |

As we all know from previous years it is just as easy to break your New Year’s resolutions as it is to make them. It comes down to creating an achievable plan and staying committed to reaching your end goal even if there are some sacrifices on the way.

From the turmoil of what was 2020, we saw goals and priorities change, with financial security coming in as a top priority for Australians. On the back of this, we have seen statistics reveal more people are willing to take a lower-paying job for career security and many are choosing to move home with their sights set on a more relaxed and family-orientated lifestyle.

Owning a home still remains the great Australian dream, property market trends are also on the rise across northern NSW and QLD with many choosing to move North from Melbourne and Sydney throughout COVID-19.

If you would like to discuss your options and how you might manage it from a financial perspective, please get in touch.

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Opportunities to seize in 2021

We are currently in a unique environment whilst we recover economically from the Coronavirus pandemic. Multiple stimulus packages are currently in place to support the economy recover, and many of these create unique opportunities you can take advantage of.

Low-interest rates

The RBA has slashed interest rates to a record low 0.10% which will allow homeowners to pay down their mortgage faster or have more income to spend elsewhere. This also makes it easier for those trying to enter the market as loan repayments become more affordable. If you currently are paying more than 3% on your home loan you could make savings through refinancing.

You may find our article “when refinancing makes sense” useful.

Homebuyer advantages

On top of low interest rates, there are multiple packages such as the pre-existing grants for first homeowners and the new First Home Loan Deposit Scheme allowing eligible first home buyers the opportunity to secure a home loan with only 5% deposit, the government will loan protect the other 15% preventing you from paying LMI and Stamp Duty.

You may be interested in our article “First home buyers on the rise 2020”.

Opportunities to buy shares at a lower rate

While 2020 turned out better for investors than many originally predicted, it has presented opportunities to buy into the market at a lower price than previously. It is important to keep in mind that there is no perfect time to buy shares as you can never predict when we are at the highest or lowest of a peak, it’s about building or adding to your portfolio when the timing is right for you and with adequate research or advice through your financial planner.

You may be interested in our market update “2021 – a list of lists regarding the macro investment outlook:”

Steps to financial success

Understand where you are now

It may seem obvious but creating a budget and understanding where you are now and what you need to do to improve your financial position is often overlooked. A budget will not only identify how much you are spending each week, but it may also highlight areas you are spending too much or could make an effort to reduce costs. It will also reveal how much you could be saving once all your bills and essentials are taken out which can help you map out your timeline to achieving your goals.

For example, if your goal is to save $12,000 within the year, you will need to be putting over $230 towards savings each week to achieve this ($12,000 divided by 52 weeks per year = $230) given you don’t tap into your savings at any point.

If you can’t afford this, you may have to push out your timeline to match your budget. For instance, say you could only afford to save $150 per week, you can calculate how many weeks it will take you to get there by diving $12,000 by $150 = 80 weeks to achieve your end goal.

You can access our free budget planner here.

We also recommend using a cashflow and budgeting app that will take some of the pain out of budget setting and tracking. At Invest Blue we work closely with Money Brilliant and if you are a client we can set you up with a “free to you” premium account. Ask your adviser for more information.

Create an emergency fund

As 2020 reminded us we can never predict what is around the corner; it also showed us the importance of having an emergency fund. As we mentioned above, it may be achievable to save your $12,000 in a year given you aren’t tapping into your savings however that isn’t always going to maintainable. By building an emergency fund alongside your savings, you can ensure you are keeping on track with your savings goal and have money put aside for those things that just pop up unexpectedly like a flat tyre, medical expenses, a broken appliance, etc. Ideally, you want to have three months’ worth of expenses set aside which can also help you keep afloat if you lost your job at any point.

Pay off debts

While interest rates are low, now is a great time to pay off those nagging debts and rid yourself from the burden of ongoing interest repayments which may have hindered you financially throughout 2020. Focusing on paying off bad debts with the highest interest rate first could ultimately save you more money further down the track and put you on the right path to finding financial security. You may consider refinancing or consolidating debts in order to achieve this. Working with an adviser on a wealth and debt strategy can be helpful as well.

Have a plan to achieve your goals

It’s one thing to identify what your goals and dreams are, but it’s important to know what that looks like and how you are going to get there. You may have a goal for example to pay off your bad debts in 2021. What will you have to repay a week to do this? Does this align with your budget? Can you set yourself regular benchmarks to check in on your progress?

For example

Goal: Pay off debt
Debt Total: $7200
Interest Rate: 11.93%
Monthly repayments required to pay off by 2022 (with interest): $680
Goal Balance by June: $3458

Breaking down your goals into a measurable and achievable plan will ensure you’re not setting yourself up for failure and it’s aligned with your budget.

Seek professional advice

Even the brightest will struggle to manage their whole financial picture efficiently because we are all emotional beings with a lot of competing time demands. The best part of working with an adviser is that you can get clarity about your own life, help to prioritise your goals, and suggestions on how you might achieve those goals that you may not have previously considered.

While there are financial improvements and habits you can create on your own, it is worth seeking advice when it comes to dealing with more complicated areas of your finances such as investments, retirement planning or diversifying your portfolio. A financial adviser will be able to review your entire financial picture and provide you with a detailed plan to achieve those long term goals and dreams.

The New Year creates a great opportunity for you to take control of your financial journey, implement new habits, seize current opportunities, and pave your path towards financial security.

If you’re ready to take control of your finances, speak to us today to find out how we can help you.

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What you need to know

This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.