Are your finances ready for 2017?
A lot of us are still getting over 2016, what a year that was! But in saying that a lot of what was brewing may come home to roost in 2017. Have you got your finances ready for what is ahead? Have you taken stock of where you are and where you need to be?
2017 looks like it may prove to be even more tumultuous than 2016. We have written previous blogs about what effect President Trump may have on markets, but there is a wild card factor that is very difficult to strategise for. The Fed has been making it clear that they see rising interest rates over the next few years as the US economy gets stronger, but one tweet from the President elect about how the strong US dollar is killing them sent the Aussie dollar up and markets into a spin.
Will he derail what has long been considered the path of monetary policy that the Fed has been telegraphing? How do you create a financial planning strategy for this aberrant behaviour? As always we look at what we know rather than what we might guess. We can never predict where markets will go, or where currencies may fall, but what we do know is that strategies based on long term trends work.
Not only is Mr Trump looming large for 2107 but Europe is heading for some very interesting times. The rise of the right wing has been evident across the world and nationalism has taken hold across Europe. In 2017 we will see elections in the Netherlands, France, Italy and Germany which will gauge just how much anti-immigration and nationalist ideals have increased across Europe. Some pundits are predicting the end of the European Union.
Along with these elections is the exit of Britain from the EU. How this affects financial market and Britain as a whole, and how that subsequently affects Australia is yet to be played out though early indications have seen the pound taking a beating.
On top of all that we have China flexing it’s muscle in the South China Sea and Russia becoming more influential across key territories and affiliations.
Step by step
Take care of the simple stuff first. Have you paid off your credit card bill from Christmas? Generally, credit cards attract high rates of interest and they should be the first thing you pay off, even if you have to scrimp a bit to get it done.
Have you budgeted for incoming expenses for 2017? Have a think about what is coming up. Do you have school fees to pay? When are they due? When is the car registration and insurance due? Do you have a mortgage? Have you budgeted for payments and insurance?
Do you have a household budget that includes power? Water? Everyday shopping and keeping the family fed?
Yes we do understand that it can be a laborious task but having a budget and planning for upcoming expenses over the year will give you an idea of what to expect and how you can make changes to your advantage.
Is your home loan the best you can get?
Home loans and interest associated with them, are one of the major expenses of a household and it is something that you should always look closely at. What rate are you paying now? Have you reviewed your home loan lately? Most brokers are happy to sit down with you and see where you are at and let you know if there is a better deal in the market.
Interest rates are predicted to rise if the Fed sticks to its plan, the question is will Mr Trump stick to the plan? If this is the case, is there an advantage for you in swapping to a fixed rate loan? There are some great deals out there but make sure you are across all the costs. Always look at the comparison rate which reflects the true cost of the loan.
So you have a budget, you have reviewed your loan(s), or are going to, and now you need to come up with a strategy to increase your wealth over 2017 and further. Most people do not have all the tools at hand to make informed decisions on an ongoing strategy. There is a lot of information to sift through and having an intimate understanding of tax laws is not everyone’s cup of tea. This is where a financial planner comes in handy.
Having a good financial plan will allow you to have a short, medium and long term strategy for making your income work for you that is based on sound understanding and not the vagaries of the market. A great financial planner will look at your entire picture, both financial and personal, and present you with options and opportunities you may not have even thought of.