Achieving your long-term financial goals doesn’t need to be overwhelming. If you can put in place some basic financial steps, you are more likely to achieve a successful outcome.
It can mean keeping on top of your options and devising strategies for investment, debt reduction and risk protection. The start of the year is a perfect time for you to take proactive steps towards a brighter financial future.
Building your nest egg
Adding to your superannuation is one of the most powerful and tax-effective ways to grow your wealth over the long term. If you’re an employee, consider using salary sacrifice to add to the mandatory contributions made by your employer. Even a small amount, paid regularly, will make a significant impact over time. Remember that there are some limits on how much you can invest before tax is affected, so it’s important to monitor your before-tax, or concessional, contributions.
If you’re a small business owner, you might face cash flow challenges that tempt you to skip your super contributions. However, neglecting your retirement savings can mean missing out on benefits later in life.
To secure your financial future, consider tackling your living expenses head-on and find ways to reduce or eliminate debt. Doing your best to pay off your mortgage as quickly as possible is a great step. Although this is an obvious way to attain financial security, it’s not always easy to implement with cost-of-living pressures. Taking small, consistent moves towards your goals though, can make a big difference. Each positive action can add up over time.
Preparing for the unexpected
Apart from finding strategies to build your wealth and reducing debt, being prepared for unexpected losses is equally important to secure your financial future.
For example, losing your home, business premises or vehicle in a catastrophic event when you’re not adequately insured creates a significant financial burden.
As natural disasters become more frequent and severe, the risk of being underinsured or completely uninsured is rising, leading to what’s known as the ‘protection gap’. In Australia alone, a study found that these economic losses exceeded $18 billion in the nine years leading up to 2023.
The Insurance Council of Australia (ICA) says there are some common reasons for underinsurance.
- Making an incorrect guess about how much it would cost to repair, rebuild or replace property and contents. The ICA suggests using a building insurance calculator and a contents insurance calculator. Most insurers include both types of calculators on their websites.
- Forgetting to update your insurance after making changes to your home or belongings. Renovations, new furniture, and upgraded appliances can all add to the value of your home. It’s a good idea to reconsider the value of replacement at least each time you renew your policy.
- Accounting for the extra costs involved in rebuilding; such as demolition, clean-up, asbestos removal, council applications, architect, and surveyor services, and even the cost of temporary accommodation during a rebuild.
- Not accounting for all your assets – you probably own a lot more than you realise. Have you included the contents of your garden shed and your wardrobe?
Financial protection for personal events
Protecting yourself financially against unexpected personal events is also worth considering.
A survey of more than 5000 working Australians shows that, on average, almost 80 per cent have car insurance while just one-third have life insurance.
Life insurance offers vital protection for your family if anything happens to you. Income protection insurance and various other personal insurance options can also help ensure you continue to receive an income when you’re unable to work.
While cost-of-living pressures might make insurance or self-insurance seem like a luxury you can’t afford, making an informed choice is the best you can do. That means examining some of the financial risks associated with events that may affect yourself or your property and carefully weighing your options.
Next steps
Our knowledgeable team at Nexia Australia are available to help you review your wealth building and risk strategies. Connect with your local adviser today to discuss your personal solutions for a financially safer 2025 and beyond.
