5 Steps to get on top of your finances
By Luke Kidd
As the new year begins, many of us are setting new year resolutions for the year ahead and many will set a goal to take control of their finances. This might mean that you want to to save more, invest wisely, pay down debts or simply manage your money better overall. If you are thinking about getting on top of your finances in 2025; here are 5 practical steps you can take.
Set some goals
Setting clear and specific financial goals is crucial for achieving financial success as it provides a guide toward making better financial decisions. Having specific goals can help you prioritise and focus on what is most important and boost your motivation and commitment. When you know exactly what you're working towards, it becomes easier to put in the work required to achieve your objectives.
To be effective, financial goals should be SMART - Specific, Measurable, Achievable, Relevant, and Time-bound. For example, instead of setting a goal of “I want to have some more savings” phrase it as something like “I’ve looked at my savings capacity and will set aside enough to have saved $10k in my offset account by December 2025”. This framework ensures that your goals are clear and easier to monitor to make sure you stay on-track.
Research shows that writing down your goals and sharing them with others increases the likelihood of achieving them by a significant 33% (1). Setting goals isn’t set-and-forget, remember to review and adjust your goals regularly to ensure they remain relevant to your financial aspirations.
Review your expenses
Understanding the expenses that you expect to incur over the course of a year is a key component to developing a good financial plan. It can allow you to understand how much you are able to save, the make-up of your discretionary and non-discretionary spending and can help you account for both regular and one-off expenses in your cash flow planning.
Often people dread the thought of pulling up a spreadsheet to work out their cost of living budget, thinking that they will need to spend hours trawling over receipts and making calculations. However, an expense analysis doesn’t need to be a forensic investigation for it to be effective. Spending a few moments listing your expenses and approximating your spending can still be an effective exercise. Because the expense analysis is forward-looking, we can assume that there will be unexpected costs and/or savings and plan accordingly. You don’t need to have a budget that is going to be 100% accurate but having something that is 75% accurate is going to be more useful to having nothing at all!
There are plenty of resources online to help you work out an expense analysis, including the ASIC Moneysmart website (2) and our own excel template which you can download here.
Avoid paying “loyalty tax”
After you have gone through you spending habits, it is a good idea to then see where you can avoid the dreaded “loyalty tax”. While this isn’t a specific tax that you pay out of pocket, the term is used to describe the higher prices that long-term customers might pay compared to new customers. Companies often offer better deals to attract new customers, while existing customers continue to pay higher rates. So if you’ve been with a particular provider for a while, it may be worth doing doing some shopping around to see if you can find a better deal. Some of the places to start include:
Financial services such as your mortgage and credit card providers
Insurances including home and contents, car, health, life and disability insurance.
Utilities such as electricity, gas, internet and mobile providers.
Streaming services, app and content subscriptions.
Shopping subscriptions such as regular grocery, clothing or other deliveries
Review your super fund
In the same way that it’s good to review your home insurance provider to make sure you’re getting a good deal; the same goes for your superannuation provider. Many Australians will stick with the default fund they were assigned by their employer without researching whether there is something better suited for them, and this can have serious long term consequences. For example, when it comes to fees, analysis by the Productivity Commission found that an increase in fees of just 0.5 per cent can cost a typical full-time worker around 12 per cent of their super balance - or $100,000 - by the time they reach retirement (3). Some people might have a good fund, but haven’t looked at whether they are using it the right way and are invested in the wrong option or have inappropriate insurance arrangements.
There are many factors to consider when reviewing your super fund including available investment options, their make-up and their performance, the level of fees and costs, insurance options, services offered and retirement income options. Reviewing your super fund and comparing to others might mean finding the best balance of pros cons across the board depending on your goals, priorities and stage of life rather than focusing on just one of these considerations. For example, you may not want to select the lowest cost super fund if the investment offering doesn’t meet your needs. Whether you make a change or not, it is useful to review whether your current arrangements remain suitable for you.
Seek professional advice
If you are feeling more in control of your financial situation and want to know what comes next and what strategies you should take it’s important to first seek advice from a qualified adviser. In our current age, there is no shortage of free financial advice available online and though social media however it’s hard to separate the good from the bad and to know what will truly be in your best financial interest. As financial planners, we ensure our advice is your best financial interests by first getting to understand you and your objectives and then developing a personalised strategy to put you in a better financial position. Often the means helping people save tax and fees, managing your investment strategies or avoiding risks and pit-falls.
If you are pursuing a better financial future as part of your goals for 2025 we hope that these steps help you get there. We’d love to hear your success stories and whether you have any other tips to share. Feel free to contact us via our website
References
https://www.canr.msu.edu/news/achieving_your_goals_an_evidence_based_approach accessed 03/02/2025
https://moneysmart.gov.au/ accessed 03/02/2025
https://www.pc.gov.au/inquiries/completed/superannuation/assessment/report/superannuation-assessment.pdf accessed 03/02/2025
Luke Kidd in an authorised representative of Alliance Wealth Pty Ltd. (AR: 001242685)