Financial planning for the new year

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Are your finances hungover from the festive season? Julianne Dowling explains how to detox for a new year.

So, you’ve splurged on gifts, holidays and festive fun… Now the party’s over, it’s time to get back on track. Getting your financial affairs into order after the summer spree is a common New Year’s resolution, but it may demand much more than just a tightening of the household budget.

Stacey Martin, a senior financial planner at the National Private Bank, says doing a financial stocktake is a good starting point. That means writing down your financial position (assets, minus liabilities, equals net worth), listing your spending and working out where you can save.

Stacey says there are different life and wealth cycles for women: single or partnered, with or without dependent children. While you may move in and out of these stages, you can still follow some universal strategies for maximum results.

For a start, simplify your values. How much is enough? Do you really need that home renovation or new car this year? These things cause wealth ‘leakage’ so think carefully about taking them on. What’s important in your life comes back to your values. “If you don’t have time to enjoy your home and possessions because you’re working hard to pay off the mortgage, what’s the point?” asks Stacey.

If your mindset is, “I’ve worked hard, so I deserve this treat”, then 2006 is the year to reprogram it to: “I’ve worked hard, so I deserve financial security and independence.” Excessive holidays, beauty treatments and shopping sprees can be a major drain on your purse power. While you don’t have to completely deny yourself, there’s a compromise to be made; less spending on temporary treats will give you greater long-term satisfaction and happiness.

“Most people, ultimately, want their own home and enough money to live on. Wealth creation may sound impossible when you’re looking at a large amount, but it’s the accumulation of small amounts that’ll get you there eventually.”

Keep better records. If you are swamped in financial paperwork, get an investment administration service (called a wrap account), or track your finances through a software program such as Quicken or Microsoft Money.

Some things to consider
Debt: Your principal debt may be a mortgage so, in case of a change of circumstance, you need to have a buffer. Try to pay off more than required. Resist the temptation to redraw funds for holidays or other personal spending as soon as you have reduced the loan.
Investing: Remember not to put all your eggs in one basket. Try to think outside the square of your mortgage. Women are generally under-funded when it comes to retirement, so topping up your super is a good goal.

Saving and budgeting: Prioritise your payments. Start with paying your investments first, then the mortgage, then yourself. Stacey suggests that a mortgage redraw account can be very handy if you pay into it, and use it as a living account.

Enhance your income: Paid activities such as babysitting or dog-walking can bring in some petty cash. Hobbies can be money-spinners, too – try selling your craftwork at markets or on auction sites.

Be money-smart
Ian Hutchinson, of coaching group www.lifebydesign.com.au, says only 3 per cent of the population have a cash flow and budget plan. But simply having one can save you 10 per cent of your income, as you’re more aware and in control of your spending. MYOB, Quicken and Microsoft Money are all great financial software packages to help you do this, or you can find sample plans and money-management tips on Ian’s website under Public/Resources & Tools, and the Australian Securities and Investments Commission’s site (www.fido.asic.gov.au), or try using Notebook:’s budget planner (page 234).

Lisa Vandenberg
45, flight attendant and jewellery designer (married with two children).

“I began designing jewellery from stones bought on overseas travels, mainly coral, turquoise, baroque pearls and semi-precious stones. I sell through fashion designer Leona Edmiston’s outlets, with growing interest from other retailers.

“Jewellery design was a fluke. For some time, I’d made things on request for friends and family, but then it snowballed. I’ve always liked creating and designing things, and it wasn’t for financial reasons to begin with. But you can succeed at something if you have flair and passion, and work hard.

“My jewellery is in the lower end of the market, and affordable. When I first got into selling it, I didn’t know the margins in jewellery, so I underpriced it.

“I still fly part-time… I would never leave flying. It’s good for the family because I can get discount travel for holidays.

“We’ve paid off our home and have other investments. I’m not motivated by money – just security. It’s about owning what you have: no credit card bills, nothing that takes over your life.

“My goal is for my kids to grow up independent and capable.”

Lisa’s money tips:

Avoid large credit card bills.
Know what you need to do to take control of your money.
If teenagers want a ‘big ticket’ item, match them dollar for dollar and encourage them
to save with part-time work.
Teenagers’ mobile phone bills can get out of hand so make an agreement that they are limited to texting and emergency calls, or try a pre-paid plan so they are responsible for their spending.