AS WITH any new year, there are never any certainties about what lies ahead, especially when it comes to investment markets.
We can expect more financial volatility heading into 2018, especially as markets react to geopolitical events and economic moves, such as rising interest rates in the United States and Europe, which could spur more increases here in Australia.
In reality, all of these things are out of our control. But there are many things you can do personally to get off to a healthy financial start, right from the get-go of 2018. They are easy things to do, and they could make a huge difference to your life.
1. Know the rules
A really important, but often overlooked, step for seniors is to understand what your financial entitlements and obligations actually are. For example, if you are fully retired, are you fully aware of the rules around how much extra income you can earn before any Age Pension you receive is affected? Do you know how much you can have in assets outside of your family home before your pension is reduced? And, do you know what your required age-based pension drawdown rate is for this financial year?
Also, are you up to speed with the new home downsizing measures taking effect from July 1? It's really worth spending some time familiarising yourself with all the rules, and you can readily do this online through resources such as the federal government's moneysmart or Department of Human Resources websites.
2. Review your financial goals
This, of course, can be done at any time, and should be done regularly. But the new year is definitely a logical time to review and reassess your short, medium and long-term financial goals.
What are your plans, and what do you need to do to achieve them? If you don't do this already, start recording your income and expenses so you can keep close track of your outgoings and, potentially, identify areas where you can save money each month. This may involve cutting back on spending in certain areas, or looking around for better deals, for example, by changing energy, insurance or telecommunications providers.
Knowing what you can do over the short term will feed into your medium and longer-term financial goals, and put you on the right path towards achieving them.
3. Tune up your investment portfolio
Whether you're still working or fully retired, the key to a good financial future is keeping your investment portfolio in good shape. What does that mean? Put simply, you want to make your money last as long as possible. That means ensuring that you don't have all your financial eggs in one basket, so you can benefit from both growth and income opportunities.
A lot comes down to your investment time horizon and risk profile. Many seniors err on the side of caution, avoiding putting their funds into the share market, for example, to reduce potential risk. Yet, there are many lower-risk areas of the market that generate good returns. Indeed, more seniors are using low-cost listed exchange-traded fund products to generate both growth and regular income. But before leaping into any investments, do your research and seek professional financial advice if needed.
4. Be realistic at all times
Mainly thanks to advances in medicine, many Australians are living to ripe old ages. That's fantastic, but it also presents all of us with financial challenges.
Making our money last longer is paramount, and so is having a good standard of living in retirement. It's definitely a juggling act, and the key is to be realistic about what you can actually achieve financially. Start 2018 by managing your own financial expectations.
Tony Kaye is the Editor of Eureka Report, which is owned by listed financial services company InvestSMART. www.investsmart.com.au
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