What to do with your money this year
You may be reviewing your finance options for 2015 or doing some pre-planning for approaching retirement. Whatever your circumstances it’s always a sound investment to review your personal financial plan.
The market is constantly changing and it pays to explore all options to ensure your nest egg is organised as effectively as possible to make the most of returns, both short and long term.
If you’re currently thinking about retirement, here are some things you can do to secure your financial future.
Understand your options – The earlier you start preparing for retirement, the more options you have to set a course that suits you. Firstly you need to determine the following:
- When you can withdraw your super
- Your retirement income stream choices and investment options
- The benefits and drawbacks of a transition to retirement pension
- Your options of taking a cash lump sum or starting an income stream
- How to get trustworthy retirement information and guidance
Where are you now? The next thing to do is to assess your financial status. Work out how much money you have now, how much you might have in the future and where it is coming from.
Get on top of your finances by finding out:
- What assets (house, savings, investments) you have and how much they are worth
- How much super you have and when you can access it
- When you can apply for the age pension and whether you are likely to be eligible
- Also make sure you know what your fixed costs are. Some expenses must be paid every month, such as the mortgage, utilities, insurance and groceries. Knowing those costs helps you develop an income strategy to make sure those expenses are covered
Make a long-term financial plan – The next step is to look at how your needs might change over time. For instance, in the first few years of retirement, you might want to travel or take up a new hobby. Later, you may want to replace your car or renovate your kitchen. Further down the track, you may want to move into a retirement village.
Find ways to grow your retirement income – Ask any retiree what they fear the most and chances are most will say “running out of money”. But there are ways to stretch your retirement income and things you can do to make your money last as long as possible. For instance continuing to work part time can reduce dipping into your savings while adding to your super.
Get advice as early as you can – Managing your finances can be hard work even if you have some financial knowledge. Ask your adviser to explain different investment strategies, the level of risk involved and the potential returns you can expect.
Diversify your investments – With many retirees living up to 90 and beyond, it's a good idea to invest across a range of different assets in order to minimise risk and optimize growth. Spread your investments to avoid financial heartache in the future.
Manage your spending – A simple way to make your money last longer is to watch your spending. Use a budget planner to help you save for special items and keep your expenses in check.
Related link: Foolproof budgeting for your retirement