Doing Your Financial Planning for The New Financial Year

Learn about financial planning for the new financial year.

When doing your own financial planning for the next financial year, the key to financial stability and/or growth – whatever your goal – is planning. Success doesn’t just happen… even to win the lotto you have to buy a ticket first.

This article will take you through some key elements to making the most of your personal budgetting efforts during FY2021/22.

Mapping out your financial plans

Compare the task of developing your budget to travelling the world. This may not make sense at first but think of your financial planning like a map to help you reach your goals (aka saving for a new car, renovating your house, adopting one of those irresistible purebred dogs, buying a business, etc.).

What income do you expect to earn, spend, save and invest? Over each week, month, quarter, half-year and annually?

Somewhere on this budgeting map, ‘X’ marks the spot where you take stock and formulate your next steps. We think the ideal time to do this with personal financial planning is the end of financial year.

By using your map to navigate toward your goals from there (Y, Z, etc), regularly keeping track of your progress on that path, you’ll know exactly where you stand. You’ll pretty much know how to balance all the elements of your financial planning because your planning has already done that for you.

It’s only when an unexpected turn happens that you’ll need to revisit the map and figure out what detours must be navigated to get back on track. By this we mean the new steps you’ll take to achieve those financial goals within your (potentially newly) defined timeframe.

As we head into the new financial year, let’s take a moment to plot the stepping stones to a successful financial plan. So you can stay on course in achieving your financial goals.

Your financial planning goal may be to own a new BMW.

Financial planning checklist

Financial planning for your personal goals can be quite fun and relatively simple. Maybe not as fun as checking your social media feed or drinking coffee. But that’s because coffee is a stimulant and big tech companies spend millions on making social media apps fun to navigate.

So why not take a similar approach to your finances, and use an app to invest, budget and put aside savings? Here are some top finance apps to stimulate your financial planning.

Maybe you use these, or maybe you go with an old school Excel spreadsheet. Whichever is your go-to, you’ll need to document your financial planning key indicators:

  1. Goals
  2. Income
  3. Expenses
  4. Saving
  5. Milestones

1. Goals

You can’t forge ahead on a successful financial planning pathway without first knowing what goals you’re striving towards. Make a list of your short-term, mid-term and long-term goals, such as getting a new phone, new car, putting down a deposit on a new home or simply saving $XXX for a rainy day.

You may wonder why goals are first on the list, rather than income or spending.

The reason is that you work hard every day to earn and spend, and ultimately to fulfil financial goals, whether these are driving a new BMW or eating healthily. But not only are you working towards your shorter-term goals, they’re ultimately motivating you toward your ideal future.

Therefore, your goals are the driving force behind every financial decision you make, which puts them in first place. So list them in order of priority and do a bit of research to find out what the ‘cost’ of these will be.

2. Income

First write down your employment income, from all sources. You might work just one full time role, part time plus a range of freelance job/s, or somewhere in between.

Depending on the work you do, consider the following factors:

  • When do you get paid (monthly, weekly, fortnightly etc.)?
  • What date/day of the month do you get paid (last day of the month, last Friday of the month etc.)
  • Do you earn a set salary or does your income vary with each paycheck (i.e., you earn a commission or are a casual worker)?

Then think about other ways you earn money…

  • What about income from your investments, such as rent from a tenant, dividends, interest earned on savings, and so on?
  • Do you receive any government assistance payments? Child support?
  • Anything else that hits your bank account on a fairly frequent basis?

Think twice about including tax return reimbursements – the dollar amount is never truly guaranteed and perhaps it’s best left as a surprise windfall? This strategy may also be best for employment bonus payments.

Then, calculate your total income over your desired regular budgeting period. For example, if you’re tracking the ins and outs of your finances fortnightly yet get paid monthly, break down your income into fortnightly chunks too. That way you’re monitoring like for like.

Your financial plan your budget should have your goals, income and spending.

3. Expenses

The same applies to expenses. Write them all down then calculate what you spend on each over that regular budget monitoring period (fortnightly or monthly are probably the best idea).

Be prepared for this step to take the longest – in today’s world we have a LOT of spending commitments. Regular outgoings like groceries, fuel, rent/mortgage, utilities, car repayments, insurances, and direct debits are some of the more obvious expenses.

Then there’s your medical/dental visits or that splurge on a new espresso machine that are less predictable.

For this reason, you should break down expenses as follows:

  • Routine living expenses (rent/mortgage repayments, food, fuel, electricity, phone, credit cards, study fees etc.)
  • Occasional expenses (clothes, medical, equipment etc.)
  • Insurance coverage (superannuation, car insurancepet insurance etc.)
  • Emergency fund (this may seem optional, but it’s crucial and will come in handy at some point)
  • Investments
  • Savings (yes, it’s technically a saving but it still needs its own budget line as funds to be recognised)

Initially, separate your lists into two distinct columns – wants and needs. And you may find that once you get busy with your cash flow, some move from one column into another. Or perhaps disappear altogether.

More on this below…

4. Budget and cash flow planning

At this point, your budget should have your goals, income and spending very clearly calculated and noted.

Once you tally your regular-interval income versus your regular-interval expenditure, you can assess what’s available to contribute towards your goals. This will help you set a realistic timeframe for when you want to achieve each.

You might have a five-year plan to pay off your new Mazda, in which case you can calculate how much you’ll need to budget per month. When taking into consideration the other savings/investment buckets you’re contributing to at the same time, of course.

During this step, you may decide to shift some of your wants off the spending list to more heavily favour your goals.

For instance, buying a new car might be more important than eating fast food, apps you rarely use or planning a girls weekend away. Maybe you chuck out your gym subscription in favour of jogging in your neighbourhood. Or you decide to start a rotating dinner club instead of eating out with your circle of friends.

Saving is key to financial planning.

5. Saving

Saving is a key part of good budget and cash flow planning. Even if it’s only for ‘just in case’ occasions.

So, give yourself time to evaluate how you allocate your finances to this given everything you’ve worked out from the above. Look again at what to prioritise and therefore re-prioritise.

What can you afford to do without so you have a buffer in the bank earning a little interest? Or, for some, it won’t be in a savings account but sitting on the mortgage as extra repayments, reducing the interest charged (extra bonus).

To round out your savings planning, also read about how to save money on car running costs and how to save money on car insurance. Thank us later!

Benefits of financial planning

Without your financial plan (aka map) achieving your financial goals could take much longer. Or you could end up off course and lose sight of your goals entirely.

Not only does careful financial planning – and the regular tracking of your progress – help you take the correct steps to stay on course, it brings you closer to your goals. The end benefit is living the life you want, even if that’s some way down the track.

Financial planning gets you closer to the home you’d like to invest in, the share portfolio you’ve always dreamed of or the car you’d like to drive. Or, it simply helps you steer clear of trouble for you and your family in navigating life’s many expenses.

Already got a car you’re happy with? Perhaps now the financial planning’s done you’re ready to switch from third party fire and theft to better protection with a comprehensive car insurance plan? Get 15% off your first year’s premium when you buy a new plan online*!

Financial planning – over to you

Don’t panic, we’re here with good news – starting now is still very much worth it. In fact, doing your financial planning any time of the year is valuable as long as it is a ‘living’ document. Set and forget won’t get you to your goals.

Have you put together a financial plan to get the car you want, to be able to add an extra member to the family, or for some other reason? What steps did you take – tell us in the comments below:

*at the time of writing

How would you, like to proceed?

How would you, like to proceed?