If you’re not quite sure where to begin, here’s a tip for each of the ‘12 days of Christmas’ that will get you back on your feet in 2011:

1. Firstly, if you haven’t seen an adviser – see one!

If you’re not sure how to find a suitable adviser, ask your friends for recommendations or you can start by visiting either the Independent Advice website (http://www.independent-advice.com.au) or the FPA website (http://www.fpa.asn.au).

2.Make a budget

Work out how much you earn and weigh up what goes out and what comes in. If you’re in negative territory then you’re in strife and need to either increase your income, or reduce your spending. A hint here, reducing spending should be the first port of call and focus on those things you won’t miss (much). 

Some simple ideas to save $5,000 a year:

• If you buy a morning coffee, make one at home or the office instead.  A coffee a day costing $3.50 each adds up to $840 a year; 
• Make your lunch – you could easily save $5 per day, which adds up to $1,200 a year;
• Cut down on the booze – not only good for you but good for the hip pocket.  Going without a bottle of wine a week or six pack of beer a week could save $10 a week, or $520 a year; and,
• And if you are one of the dwindling number of smokers out there…quit.  If you smoke 10 a day, and that costs around $7 a day, that’s $2,480 a year…for the privilege of shortening your life!

3.Cut up the credit cards

If you are having trouble paying off your cards, then you are spending more than you can afford.  Cut up the cards, consider a loan to consolidate the credit card debt (this will save you interest and help with the repayments), and start spending within your means.

4.Know where your money goes

There are only a small minority of people in the world that don’t need to worry about monitoring their spending. For the rest of us, regardless of your income or expenditure, it’s important not to lose track of what’s costing you money on a daily or weekly basis. Here’s a tip: watch out when paying bills via automatic transfer or direct debit as despite its benefits, it’s a lot easier to consume more without feeling the pinch, or continue paying for things you no longer use, like a gym membership.

Once you know where you spend your money, you can then make an active decision as to whether you wish to continue that spending and adjust your budget accordingly.

• Ideally, you should aim to save at least 10% of your income as a minimum.
• If you have specific expenses coming up, then save for them.  For example, to save for a holiday next December costing $2,500, you need to put aside $50 a week between now and then into a dedicated savings account.

5.Protect the downside

Make sure you have adequate insurance in place to protect yourself from life’s hardships, such as life and income protection insurance, and house and contents insurance.

Sometimes it is hard to find the cash to pay for insurance – make it a non-negotiable part of your budget.  Getting advice might also help as you can get your life insurance from your super fund, which reduces the personal cash flow impact of getting cover.

6.Estate planning – have more than just a will in place to protect your assets

A will is only one part of estate planning.  Superannuation nowadays can be a large asset and there are different rules that apply to the distribution of superannuation benefits when someone dies.  You should seek advice from an adviser before completing forms in relation to beneficiary nominations for your super fund.

If you’ve got the basics covered, here are a few more tips that will ensure you’re taking advantage of your investments in 2011:

7.Know where your super is and consolidate

If you don’t know where your super is, now’s the time to find out.

A good place to start is to see if you have any lost super floating around or multiple accounts as these will need to be consolidated to ensure you’re getting the best return on your investment and to ensure duplicated admin fees aren’t eating through your retirement savings.  There are numerous sites that can assist: visit the Find My Super website at http://www.findmysuper.com.au or http://www.supertrace.com.au. There’s also the government unclaimed money website at http://www.fido.gov.au/unclaimedmoney.

8.Make your savings work for you

If you have a savings capacity make sure you have a strategy in place for putting the money to good use. For instance, get professional advice on whether you should be reducing debt or putting that money aside into a longer term savings investment plan.

If you are interested in share investing, the Australian Stock Exchange has some good consumer directed courses (http://www.asx.com.au/resources/education/index.htm), but beware of share trading scams – never forget that investing in the sharemarket is a long term proposition, which means for at least seven years.

9.Transition to retirement

If you’re over 55, consider whether a transition to retirement (T2R) strategy is suitable for your lifestyle needs and retirement goals. These strategies involve you receiving an income from your super fund, while you continue to work.  This can help you increase your contributions to super, increasing your retirement nest egg.

You should seek advice prior to implementing a T2R strategy, as while most people can get some advantage from them, they do not benefit everyone.

10.Regularly review your investments

Review your investments annually and make sure they’re achieving what you want them to achieve. For instance:

• Is the spread of investments across different investment types right for you and your goals?
• Do you have a spread of investments, or is your investment portfolio overly exposed to one particular company or investment sector?
• Is the income or expected growth from your investments appropriate to achieve your financial goals?

11.Avoid paying commissions for advice

If you’re paying commissions ask your adviser about changing to a fee-for-service model.  That way you know you are only paying for the services you require, and the investments recommended are not biased or connected with the remuneration paid to your adviser.

12.Give the gift of knowledge

Finally, if you are struggling with a Christmas gift idea for a teenage or twenty-something child or grandchild, why not consider a book that might help them for the rest of their lives.  Once such book is “The Barefoot Investor” by Scott Pape – a well written Australian book targeted at those starting out on life’s financial journey. Alternatively, financial gifting, such as purchasing a block of shares, is a good way to get them started and investment-minded.

If you’re unsure about any of the above, I’d love to hear from you or feel to leave a comment.