Three simple tips for preparing your finances for 2023

Key points:

• Take the time to develop clear financial goals for 2023
• Prepare your important documents for any unexpected future scenarios
• A financial advisor can give you a clear plan for organising your finances

The start of the new year is the perfect time to get your finances in order and to prepare for what is to come.

Rosie Bouton, Principal Financial Advisor at We Plan Financial in Victoria, says that there are three easy ways you can prepare for what the new year brings.

“Although it is always a good time to get your finances in order, many people find that the beginning of a new year is better from a mental and emotional perspective,” explains Ms Bouton.

1. Make clear financial goals

If you have a lot of financial questions on how to prepare yourself for the new year, it may be a good idea to transform those questions into ‘SMART’ goals, says Ms Bouton.

• Specific – Retirement means different things to people, so you need to be specific about what your goals are and develop clear objectives
• Measurable – Set achievable goals and track your success. If you need ‘X’ amount of income for retirement, this gives you a set target to work towards.
• Agreed – Make sure your goals are discussed and agreed upon by your partner or family so they can assist in making this goal a reality. It’s always a good idea to share your own goals, desires, and objectives with anyone who may be impacted by it now or in the future.
• Realistic – Have all the resources you require at your fingertips that will enable you to meet your goals.
• Time-bound – Put in place a timeframe to assist you in reaching your goal. Planning earlier means you have more time to make small financial or lifestyle changes that will have a significant impact over time.

“If you really don’t know what amount of income you’ll need in retirement, it is always a good idea to start with how much you are currently spending, ” says Ms Bouton.

“Keep a budget and stick to it, so you have the understanding of where your money is going. Understanding where your money is going is vital to creating a successful plan.”

There are many phone and tablet apps dedicated to assisting you with budgeting or tracking where you are spending money. Simply search for budgeting apps on the Apple Store or Google Play to browse options.

2. Get your estate plan in order

A new year may mean it is the perfect time to update any important documents you have, like your Will, Enduring Power of Attorney (POA), or Advance Care Directive.

“Many people believe that an estate plan is simply preparing a Will. An estate plan is much more than that,” explains Ms Bouton.

“As an example, there are a number of assets that may not be automatically dealt with via a Will, like superannuation proceeds, assets jointly held with others, and proceeds from life insurance policies.

“Estate planning also allows for changes to your circumstances before your death, such as future care needs, and loss of capacity to make decisions for yourself.”

If you die as an ‘interstate'( without a valid Will) this can be disastrous for the family you have left behind. Your assets will be distributed by a court-appointed administrator, depending on the intestacy law in your State or Territory, rather than in line with your personal wishes.

A legal Will can ensure your assets are distributed to your preferred beneficiaries in the manner you want, avoiding unnecessary costs and delays.

Besides a standard Will, there are more options available if you have complex arrangements. For instance, Testamentary Trusts provide asset protection and tax planning opportunities, but do incur additional costs.

A Power of Attorney document gives a selected person the authority to manage your financial affairs on your behalf. A POA can become immediately effective from the time you sign it, until you formally revoke it, or in specific circumstances, like the loss of capacity due to dementia.

A POA will allow your chosen Attorney to buy and sell assets on your behalf, enter loan agreements, and action other legally binding tasks.

An Advance Care Directive is an important document that outlines your preferences for future health care. It is much more than palliative care planning or a ‘do not resuscitate’ direction.

Ms Bouton says, “An Advance Care Directive is deeply personal and differs from person to person. Some people might value comfort over sustaining life in particular situations.

“It is important to focus on what living well means to you, and where your ‘line in the sand’ might be in relation to different outcomes.”

To view the laws around Advance Care Directives in your State or Territory, head to the Advance Care Planning Australia website.

An estate planning professional can help you organise all of your important documents, or you can contact the Officer of the Public Advocate in your State and Territory for more information.

3. Consider engaging a financial advisor

If you are unsure about what you should be doing to prepare yourself financially, engaging a financial advisor may be your next best step to get yourself on the right path.

Ms Bouton says, “A financial plan is like having a good road map for a long journey. Not only does it outline your ultimate destination, it shows you the best and most effective way to get there.

“A good financial advisor can assist you in shaping your goals and objectives, creating a budget, and implementing various strategies to ensure that you reach your goals within the time frames you specify.”

A financial plan from a financial advisor is called a Statement of Advice, which should detail the scope of the advice you receive, your personal details, goals and objectives, and their recommendations on how to achieve this goal, including any pros and cons to various strategies they have suggested.

Choosing a financial advisor can be a difficult decision, so you should consider whether a financial planner is the right choice for you and your situation.

To find a financial advisor or service, visit the products and services directory on the AgedCareGuide.com.au.

DISCLAIMER – This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. You should seek appropriate professional advice based upon your own personal circumstances. Although we consider the sources for this material reliable, no warranty is given and no liability is accepted for any statement or opinion or for any error or omission. This information is current as at the date of this document.

How are you planning to prepare your finances for the new year? Tell us in the comments below.

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