I find that even the most financially responsible people can be overwhelmed with the euphoria of the Christmas and New Year celebrations. For most this is unlikely to have a serious impact on their financial well-being provided they can quickly get back on track. Here are some suggestions that might help you get back on track.

Assess your current financial situation

If you have ended the holiday season with large credit card balances, the first thing to do is to put in place a repayment schedule to clear that debt as quickly as possible.

The government has announced several measures to relieve the high cost of living, and there are also new tax incentives. This may be the time to review your Budget taking into account any additional funds that will be available and considering how much your normal cost of living expenses have risen.

This is also a good time to do create a new Assets and Liabilities table. Check that your Debt Servicing Ratio (DSR) is not too high. A DSR is a ratio of debt repayments (interest and capital) to income. An acceptable ratio would be less than 35% with an optimum being more like 25% to 30%. Any debt-to-income ratio above 43% is considered too high.

If your debt levels are too high, create a repayment schedule so that the DSR can be reduced to acceptable levels.

If you don’t have too much debt, now may be the time to consider an investment property, using a deposit large enough to ensure you do not exceed acceptable levels of debt.

Assess how much you should save

A common rule of thumb is known as the 50/30/20 rule:

50%: For needs and obligations, like rent, bills and food
30%: For wants, like going out, buying clothes and streaming services
20%: For savings and investments – Don’t forget 11.5% is currently saved through the SGL, leaving you to save about 8.5% of your salary.

Another factor to consider is how much you will need for a comfortable retirement. According to the Association of Superannuation Funds (ASFA) you will need around $595,000 in retirement savings to live comfortably as a single person, and $690,000 for a couple.

If your current savings plan does not achieve those goals, your level of personal savings may have to be increased.

Refer to the website, Association of Superannuation Funds for more information.

Motley Fool will help you customize the values according to your specific needs.

Assess how you will spend your savings in retirement

The 4% rule is a popular and simple means of assessing how much you can spend and not run out of money. This rule limits you to withdrawing no more than 4% of your savings each year.

It is important to take into account any irregular one-off payments such as car replacement, house repairs, and overseas holidays.

It may be that you also want to consider if you have sufficient capital for aged care. The Office of Public Guardian (Qld) is a good reference.

Financial Mappers

Financial Mappers can help you with all of the above and many more. Where Financial Mappers is important is that it moves past just annual averages, but allows you to take into consideration variations specific to your circumstances.

Maybe you want to leave a legacy to your children. If so, you should determine who will receive various assets and how these assets can be preserved without limiting your desired retirement income.

If your assets and retirement income are limited, you may be eligible for the Aged Pension (full or part pension). Financial Mappers can estimate the time in retirement when you are eligible for the pension, and this will be included in your retirement income.

Once you have created your financial plan, select one of the over 20 Reports that can be automatically generated to help you understand your financial plan

Your Financial Goals

I hope I have given you the incentive to set your financial goals for 2025. If you need help consider reading some books from one of the Book Reviews written by Good Financial Reads in the Financial Mappers Blogs.

What’s your most important financial goal: