The start of a new year is a great time to get on top of your finances. It’s a good time to go through your previous year’s receipts, personal budget, and income. Use all this information to evaluate last year’s financial performance, make changes and set a plan for the year ahead.

1. Go through the books

It’s all too easy to swipe a card or direct debit your bills and loose track of how much you’re actually spending. Check whether you’re sticking to your budget estimates, and compare your bills to the previous quarter or the same time last year and if there’s a big difference work out why.

2. Look at your progress

Has your overall financial position improved in the past year? Get out your bank statements and work out whether you have reduced your debts and loans over the past 12 months.

3. Prioritise

Think about what you want to achieve in 2012 and where you want to be in a year’s time. My advice would be to get rid of any kind of credit card debt first. This is your most expensive debt, charging around 20 per cent interest. If you are currently renting you may like to focus on saving a home deposit this year.

Economy

Economies in Europe and the US will continue to limp along at best. We’re still concerned that the condition of the PIIGS (Portugal, Italy, Ireland, Greece and Spain) will deteriorate and more will have to be bailed out.

… there will continue to be a great deal of social unrest in Europe as they adjust Government cutbacks to reduce debt.

… official interest rates will keep rising and be 5.5-6 per cent by the end of the year. Although a crack in China or a Europe-led financial crisis will dampen rate rises.

… The economy should maintain a 3-3.5 per cent growth rate, inflation will spike on food and oil price rises, unemployment will stay low and the skills shortage continue.

Shares

Major stocks are trading on pretty high multiples at the moment and will have to produce decent results to maintain these levels.

… If commodity prices start to ease and resource companies begin issuing profit downgrades then we could see the market under increased pressure.

… solid but unspectacular 2011

… the key will be sticking to solid companies with strong cash flows and good management.

… Good dividend yields will be a real bonus.

Property

We think there will be a slight easing in values, without a crash, this year but it will certainly be a buyers market.

… Prices will be under pressure in 2011.

Australian Dollar

Global investors see the Aussie dollar as providing good investment exposure to the commodities boom and to Asia.

… see the currency continuing to appreciate for the next couple of months and then ease in the second half of the year to finish in the low 90 US cents.

The peak Spring selling season for property has finished and it hasn’t been pretty ugly. There were plenty of signs of the slowdown in residential property values… poor auction clearance rates and falling prices.

If you’re thinking of selling in 2012 (or your sale is being carried over from this year) you need to be a lot savvier in the way you sell.

Sure the market will continue to be soft next year but the big unknown is the impact of a crumbling Europe on our banks. If the global banking system is hit with big losses from their European investments then a potential credit squeese will choke credit, make banks nervous about over geared property clients and add to the pressure.

Real estate agents are telling us grim stories of families being “encouraged” by their bank to sell but holding out for an unrealistic price hoping to not only clear the debt but also produce a profit.

They wait so long for an imaginary “fairy godbuyer” that the bank eventually moves in with a quick mortgagee sale for a lot less which eventually doesn’t even cover the home loan.

The facts of life are that property does fall in value. Like every other investment, residential property moves in a cycle up and down. Sure you only crystallise a loss if you have to sell, but that’s no different to any other investment either.

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