Laurence Smith, Financial Adviser at UEM Wealth, part of the UEM Group
BY LAURENCE SMITH, FINANCIAL ADVISER, UEM WEALTH
Happy New Year. Congratulations, you made it. Most people will take time through the Christmas and New Year period to relax or visit family members. Some may look on the holiday period as an opportunity to get a home project or two done. It is also a fantastic time of year to conduct a financial health check for yourself to take stock of what has happened in the last year, and prepare for what you hope to happen next year.
The easiest place to start is a personal balance sheet. Put simply, this is a list of everything that you own, and all of your debts. I find it simple and logical to divide assets into categories, starting with personal, then investment, then business, and finally superannuation. The internet can provide some help with valuations for cars and property. When in doubt, put down a reasonable estimate of value, and try to resist the temptation to inflate the value of personal collectable assets like classic cars or art.
Once you know the value of everything you own, put down the value of everything that you owe. I normally do this in order from the longest-term debt (like property mortgages) down to the shortest term debts like credit cards. If you have succumbed to post-Christmas sales, this may also be where you record “buy now pay later” schemes.
Subtracting your total debts from your total assets will give you a measure of your personal net worth.
Now that you know more about what you’re worth, you can look at your income and expenses. There are some excellent tools for this, including free budget templates that can be downloaded and prompt you with ideas on what to enter. Be sure to try and account for all regular sources of income. If you’re unsure of your expenses, download and print bank and credit card statements for the last three months to give you an indication of your major expenses. When planning out for the year to come, you can also look at planning out larger items for the next year, like a holiday or a new car.
By doing this exercise each year, you can gain visibility over your personal financial position, create direction for the next year, and motivate yourself to set achievable goals. You can identify potential savings and think about the best use of those savings. You may also look at this information as a catalyst to think about whether you hold the right level of personal insurances (for example, consider what the world would look like for your dependents if both you and your income were suddenly no longer here).
This whole exercise may take you an hour or two, but it’s well worth it if it sets you up for success for a whole year. If you find that it’s challenging, seek out a qualified financial adviser who can assist you in undertaking this exercise and formulate strategies to help you achieve your goals.
General Advice Warning – this is untailored, general advice. It does not take into account your personal circumstances. You need to decide whether it meets your needs. UEM Wealth and Laurence Smith are both Authorised Representatives of Crown Wealth Group Pty Ltd (ABN 22 603 037 510 / AFSL #494274). Laurence Smith may offer services through UEM Wealth and UEM Group. Accounting services are provided by UEM Group. Financial services (financial product advice and dealing) are provided by UEM Wealth. To the extent permitted by law, although the same adviser may offer you services under the above businesses, each business is solely and separately responsible for the advice they each provide.
