Financial Housekeeping

Tips to Start 2025 on the Right Foot

Many people delay auditing their finances due to a lack of motivation, fear of what they might find, or uncertainty about where to start.   However, just like regular health check-ups, reviewing your finances can help you identify and address potential issues early on.

No matter your age, income, or life goals, consider adding these tasks to your financial to-do list this year:

Tackle Your Debt Head-On

It's common to feel unmotivated when looking at debts, often leading to only paying the minimum. If you have the means, consider a more aggressive approach.

One effective strategy is the debt avalanche method.   This involves paying the minimum on all debts but prioritizing the one with the highest interest rate.   Once that’s paid off, move to the next highest, and so on.

Alternatively, the debt snowball method focuses on paying off the smallest debts first, regardless of interest rates.   This method aims to build momentum with early wins, motivating you to tackle larger debts.

Monitor Your Net Worth

Have you ever calculated the total value of everything you own?   Determining and monitoring your net worth over time can provide a clear, simple view of your financial health.

Start by subtracting your total debts from your total assets.   Assets might include cash, shares, super, and property, while debts could include your home loan, credit card debt, and HECS-HELP debt.

Don’t be discouraged if your net worth is negative, especially early in life when student debts and mortgages are common.   The key is to ensure your net worth trends upwards each year as your assets grow and debts decrease.

Get Serious About Your Cash Flow

While your net worth offers a snapshot of your finances, it’s also important to track the dynamic aspects, like cash flow—how much money is coming in versus going out each month.

Start by tracking your expenses.   You might be surprised at how much you spend on certain items (new clothes, takeout, streaming subscriptions, etc.).

After the initial shock, create a plan to reduce non-essential spending and improve your cash flow.   Any money saved can be invested or set aside for emergencies.

Build Up Your Emergency Fund

An essential part of your financial toolkit is your emergency fund—a liquid reserve for tough times, ideally covering three to six months of living expenses.

Think of it as self-insurance.   In case of unexpected bills or job loss, a well-stocked emergency fund can help you stay afloat without selling assets or incurring debt.

Take Charge of Your Super

Super is one of the most tax-effective savings vehicles available to Australians.   While you can’t access it until retirement, there’s plenty you can do to optimize it during your working years.

Consider making extra contributions, reviewing your investment portfolio, and adjusting any built-in insurance to better align with your goals and circumstances.   These moves are especially beneficial the younger you are, as there’s more time for benefits to compound.

Record Deductible Expenses

Even if tax time isn’t imminent, it’s wise to be prepared.   Understanding what you can claim and keeping records throughout the year can save time during tax season.   Use tools like a spreadsheet or the myDeductions feature of the ATO app to track deductible expenses.

Mastering your finances can be challenging, especially if immediate results aren’t visible.   The key is to stay patient and consistent until healthy financial habits become second nature.   Celebrate small wins along the way, and consider consulting our financial advisers at Kingston Private Wealth if you’re uncertain about anything.