2025 is nearly here. And even though economic confidence has been low in 2024 with cost-of-living rises and inflation, experts are predicting that 2025 (and into 2026) will be a better period financially for many Australians. Inflation is moderating, tax cuts are in place and our disposable incomes will likely recover over the next 18 months. Great news!
So as 2024 draws to a close, how can we prepare financially for 2025 to make the most of the economic upturn and set a solid foundation for the future? Let’s start by making the most of financial goal setting.
Why should we set financial goals? When it comes to achieving financial security nothing is more helpful than setting goals. Of course, the goals need to be SMART – that is, specific, measurable, achievable, relevant and time-bound.
SMART goals are actionable and achievable but to meet those criteria you must be realistic about what you can truly accomplish. You might want to save a million dollars in 2025, but is that really doable within your budget? Having goals that are not achievable will only undermine your confidence and stop you from making real strides towards financial health.
So, what financial goals should you focus on in 2025?
The first thing I always suggest to clients looking to improve their financial position is to focus on paying down high interest debt. With higher interest rates at play, it’s become more expensive to service your existing debt (you’re simply paying more for the same thing).
By reducing high-interest debt, such as credit cards or personal loans, you’re protected from exposure to further expenses.
Financially savvy individuals review their budget every year. That’s a very good thing because your priorities and environment will change every year too. Budgeting doesn’t have to be an upsetting process. Think of it as a way to focus on affording the things you care about most.
When you go to review your budget start by taking a good look at where you’re currently spending your money and whether that fits with your current priorities and goals. If not, rework the budget so you’re focused on spending on things that align with your priorities and goals – then do your best to stick to the plan.
You’ve completed your budget and made a start on paying down your debts. If home ownership is on your radar, you’re now in a great position to understand how much you could potentially borrow to buy a home.
Reach out to our team. We can help you determine your borrowing capacity and other lender requirements so you can get on the path to home ownership in 2025.
If you already have a mortgage, the beginning of the new year is the perfect opportunity to get a home loan health check. While your home loan might have been an excellent choice when you first bought your home, over time your job, family and lifestyle might have changed. And that might mean your home loan should change as well.
A home loan health check will review all these factors and see if you can get a better rate or better features from another lender.
In the same vein, it’s always important to shop around for the best mortgage option for you – after all your home is generally your largest monthly expense! The market may have changed, different lenders may offer better initial rates and there may be lenders that you haven’t considered yet (such as non-bank lenders). And this might mean there are better deals for you out there.
Our team has over 40 lenders on our books and can certainly help you find the best deal for your situation.
Depending on your unique circumstances of course, it’s a good rule of thumb to save three to six months of living expenses. This is your ‘emergency fund’ and it can be used to bolster you when unexpected situations come up – things like car repairs, medical expenses or even daily living expenses if you were to be out of work for a time.
Your savings give you a comfortable financial safety net.
Legislative changes can sometimes offer you financial support you might not even be aware of. For example, recently the government proposed changes to HECS indexation and repayment terms. Previously they were indexed in line with inflation, which could lead to sharp increases in your debt. But under the new legislation, indexation rates will be reduced, meaning your debts will grow more slowly.
In addition, the new Labor government has proposed a reduction in outstanding balances by 20%, as well as a higher repayment threshold. That means you could feel relief in the coming months.
This legislative change could make a difference to your borrowing capacity – and improve your future financial position. That’s why it’s important to pay attention to legislative changes (or speak to our team, who can help!).
Research shows that only about a third of Australians have enough superannuation to comfortably support themselves in retirement. The figures show that couples who own their own home will need about $73,000 per year, and single people will need about $50,000 per year. These numbers are also expected to increase as the cost of living increases over the coming decades.
When it comes to your 2025 financial goals, putting money towards retirement should be at the top of the list. If you’re starting a new job, negotiate salary packaging that maximises employer contributions. Whenever possible, consider adding extra super through salary sacrificing or after-tax contributions. And if you have multiple super accounts, consolidate them into the one with the lowest fees and strongest performance history.
Insurance is a vital part of financial planning, but it’s easy to fall into the trap of having the wrong amount of insurance. Being under-insured can leave you exposed to financial risks. While being over-insured means you’re paying for coverage you don’t need.
Getting this right is an important financial goal. An expert will be able to guide you (and we have some great partners to recommend!
Housing expenses, even outside your mortgage or rental payment, can be a huge bulk of your outgoings each month. This includes things like insurance, utilities and even taxes. Take a look at these expenses and see where you can make any cutbacks. With such a large expense, even small changes can lead to significant savings.
2025 is shaping up to be an opportunity to reassess and realign your financial goals. Stay informed of legislation changes, like HECS indexation, pay down debt, make sure you’re looking to the future and set actionable goals, and you’ll be well on your way to a brighter financial future.
The key is to start small and stay consistent. And of course, get in touch with our experts who can help.
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