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End of year financial health check
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This month sees the end of the 2006 financial year and as part of the Institute of Chartered Accountants ‘Financially Fit’ series, the Institute is advising Australians to take this time to review and assess their finances.  
 
The recent budget offered tax cuts, but the rise in interest rates and higher fuel prices are challenges that will impact on everyone’s financial situation and requires some analysis and adjustment to ensure financial and lifestyle goals are still achievable.  
 
In health terms, to get fit you need to take responsibility for this to happen, similarly “Financial Fitness” requires you to take just as much responsibility.  
 
“When financial goals are realistic they are generally always achievable, but they need to be flexible to take into account new circumstances. The tax cuts offer an average of $10 per week to middle income earners, which does little to alleviate the extra charges from rising interest rates and increased fuel costs,” said Hugh Elvy, Manager for Financial Planning and Superannuation at the Institute of Chartered Accountants in Australia.  
 
Elvy continued, “A financial situation is always affected by more than just major life changes such as buying a house or having children, it is also impacted by the economy and there needs to be a “buffer” in every budget to account for this.  
 
“End of financial year prompts people to consider their income to complete their tax return, but Australians should take this opportunity to also consider their overall financial situation. Just as regular exercise is essential to staying healthy, maintaining a realistic financial plan as part of a weekly or daily budget is the only way to becoming financially fit long term.”  
 
Institute ‘Financially Fit’ checklist:  

  • Review budget - detail how much you earn and spend
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  • Question expenses - have they changed due to external sources and are they needed?
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  • Review goals - what do you want to achieve - pay the bills on time, kids education, retire etc?
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  • Risk management - assess what can impact the achievement of your goals and review insurance
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  • Review savings - save first, spend later, assess savings plan and ensure it will help reach your goals
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  • Review estate planning - ensure your family’s financial needs are catered for in all circumstances
 
Superannuation is one of the most effective saving vehicles, even more so after this year’s budget.  
 
“There are many components to a Financially Fit strategy. One element is superannuation and end of year is an ideal time to review and consider the Government’s co-contribution super scheme. For people that earn up to $28,000 and contribute up to $1000, in after tax dollars the Government will contribute up to $1,500. The benefits of this scheme cut out when you earn more than $58,000. This is a savings opportunity that has to be a consideration for everyone on these income levels,” said Elvy.  
 
“In the recent budget the Government extended the scheme so the self-employed will also be eligible for co-contribution from July 2007,” continued Elvy.  
 
As part of the key changes to superannuation reform announced in the budget, the Government will begin to take a more active role helping Australian’s consolidate their super funds. An Institute survey earlier this year revealed that one in four Australian’s hold multiple super funds, despite an overwhelming awareness of the need to consolidate funds people admitted they just haven’t got round to it.  
 
“The multiple factors of end of financial year tax returns, the recent external factors impacting on Australian’s finances and the superannuation reform make this the ideal opportunity for Australians to take control of their finances and superannuation to ensure it is working for them. A licensed financial adviser can provide the tailored and comprehensive advice to ensure that Australians are ‘Financially Fit’ now and going forward, ” Elvy concluded.