Kick starting your finances in the New Year

It can be hard to carve out time during the year to sit down and really look at your finances. That’s why the New Year period is ideal as there are usually less distractions and work pressures. While the prospect of getting lost in all the paperwork might seem daunting, it is well worth the effort to review your personal financial situation and think about what you want your financial future to look like. Remember, small changes in the way you manage your money now can have big results in the long term.

As it can be overwhelming knowing where to begin, here are three key areas where you can start straight away.

Set up a budget

There’s nothing particularly complex about doing a simple household budget. All you need to do is record all of your income and all of your expenses, and then subtract your expenses from your income to see what you have left. This is your "disposable income". Having a budget is very useful because it can very quickly show you where you are living beyond your means and spending more than you are earning. You'll be able to see where your money is going and where you could cut back. Budgeting is also a great way to help you save for big goals like a house deposit or an overseas trip. You can also use a budget to prioritise debt repayments.

Try our AMP Budget Planner at www.amp.com.au/budgetplanner for an easy way to assess your current financial situation and gain control of your finances.

Check your debts under control

While using a card can be more convenient than using cash, expenses can quickly mount up. You should be paying off your card in full each month, but if you can’t do that, at least pay off the minimum amount due so you don’t get hit with a late payment fee.

Set up an automatic debit system so that you’re never late paying at least the minimum monthly balance on your card. Interest on credit card debt can be as high as 20 per cent, so it’s very important that you are using your cards wisely. Remember this is non-deductible debt which means you need to be paying it off as fast as possible. If you’ve reviewed your card statements over the last 12 months as part of your budget planning and found that you regularly spend beyond your means, you may want to decrease your card limit.

Review your super

While retirement might seem a long way off, your superannuation is likely to grow into the biggest asset you own after your house. That’s why it’s important to make sure that you’re still on track to achieve your retirement goals. One of the simplest things you can do is to consolidate the number of super funds you hold. If you’ve had more than one job in your career, it’s possible that you have a number of different super accounts in your name. Consolidating them into one account is a sound strategy because it means you can save on fees and charges. The other key benefit of consolidating your super is that your retirement savings are more likely to grow faster. With all your savings being managed under one consistent investment strategy, you’re much more likely to achieve your retirement goals sooner.

However, you should be aware of all the implications before transferring your super, such as your other superannuation fund(s) may charge an exit fee when you transfer and the transfer may result in a reduction in insurance cover.

Information on consolidating your super is found at www.amp.com.au/consolidate

What you need to know
Information current as at November 2009. Any advice is this article is provided AMP Financial Planning Pty Limited, ABN 89 051 208 327. This article contains general information only. It does not take into account your objectives, financial situation or needs. Please consider the appropriateness of the information in light of your personal circumstances. If you decide to purchase or vary a financial product, your financial planner, AMP Financial Planning and other companies within the AMP Group will receive fees and other benefits, which will be a percentage of either the premium you pay or the value of your investment. You can ask us for further details about this.