The thing with strategies (and New Year resolutions) is that they need to be specific and achievable.
Vague: "I'm going to lose weight" or "I'm going to improve my finances" goals are almost certain to fail, whereas specific: "I'm going to drop five kilos by walking an hour before work every day" or "I'm going to cut four years and $60,000 in interest costs off my home loan by paying an extra $100 per month on to it" can succeed because they are clear-cut goals with defined ways of achieving them.
Here are some priorities for 2013 chosen by News Limited columnists Justine Davies, Bruce Brammall, Mark Bouris and Kerrin Falconer.
Justine Davies:
- Flick the credit cards! We owe $49 billion on credit cards, with three-quarters of that accruing interest at rates north of 10 per cent. So if you have personal debt, then set a strategy this year to pay it off in full.
- Find your super. Yes it's boring, but according to the tax office there are 3.4 million lost super accounts "out there", with an average balance of $4800 per account. You could potentially add tens of thousands to your retirement nest egg by finding your lost super, so set aside a few hours and hit the phones.
- Invest in yourself. Those who are degree-qualified will earn a lot more over their lifetime, on average, than those who aren't. A few extra thousand invested in your education this year could be one of the best returns you'll ever make.
Justine Davies is finance editor and commentator with financial research and ratings firm Canstar.
Bruce Brammal:
- Get ahead on your home loan. Keep your repayments high and build up a good buffer. You still need a big stash for a rainy day enough for a 40-day-and-40-night flood of biblical proportions. But outside of that, spare cash might find better returns in investments.
- Second, test your expenses. Have you done a health check on your mortgage recently? How about your car, health and home insurance? Don't get taken for granted. It's a "squeaky wheels and oil" sort of thing. You might need to complain or threaten to walk. But don't just chase a quick saving. Compare quality it's often worth paying extra for it.
- And, finally, investment. The five-year investment limbo we've been in since November 2007 has got to end soon. And being in the game when it does will be crucial. Interest rate cuts and low unemployment should mean that it's time for some action in residential property this year.
Bruce Brammall is the author of Debt Man Walking (debtman.com.au) and principal adviser with Castellan Financial Consulting.
Mark Bouris:
Planning, investment, succession. Those are my three tips for every Baby Boomer in 2013.
- When you visit a financial planner, most will ask you the same question, "Where do you want to be in XX years time?". This is vital. It's the only way anyone will be able to figure out what they need to do to get to that key point. By identifying the end game, you can then work your way backwards and use the last years of your income-producing life to contribute to that goal.
- With regards to investment, for those of you who are still working, this is a vital time. What are you doing to add to your super contributions? What salary sacrificing or other plans do you have in play to make the most of these last working years? What are you invested in and is it performing the way you want it to? We've seen the risks involved with being overly reliant on equities and not being properly diversified. So the strategy here is to get active and make sure your investments are working for you. If not, now is the time to make a change.
- The last strategy you need to put in place is the distribution of your assets when you pass away. This is something that too many people ignore until it's too late. Don't be one of them. Do your succession planning now while you are of sound mind and body. The planning you put in place can always be altered, but now is the time to get the foundation laid to give both you and your family peace of mind.
Mark Bouris is the executive chairman of wealth management firm Yellow Brick Road.
Kerrin Falconer:
2013 is the Chinese Year of the Snake. The snake is keen and cunning, intelligent and wise, just like many retirees.
- Have a stash of cash. All the generations need access to cash but retirees particularly need cash for living expenses, as there are no wages or salaries flowing into bank accounts any more. If the GFC has taught us anything, it is that cash is king in difficult times. Having 2-3 years of living expenses in cash enables you to sit back and leave growth investments alone without having to access them, when markets are down.
- Grow an income stream. The official cash rate has fallen over the past 12 months to 3 per cent. Indications are that rates may fall further. As such, term deposit rates have lost their gloss. For me, carefully selected high dividend yielding shares are far more attractive and more likely to give a higher rate of return. The big bonus is the franking credits, which can help to minimise any tax or can be refunded if not used.
- Expect the unexpected. Whatever has been predicted by economists, banking gurus and weather forecasters may or may not happen. There is a reasonable probability though, of something completely out of left field happening. At a time like this, markets and minds will be thrown into a tailspin. When this happens, remember that this time it isn't different.
Kerrin Falconer is a finance writer with 15 years of financial planning experience.
Reproduced in part with permission: News Limited Network, Top three investment strategies for 2013, 22 January 2013
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