New Year, new start, and new financial resolutions. The start of a New Year is a perfect time to review the year that was and make financial resolutions for the year ahead.
Learn what it takes to successfully accomplish your financial goals my following these simple steps:
Plan to succeed
If you want to get serious about your savings this year, start by identifying your financial aims and the goals you want to achieve by the end of the year. Are you saving for a holiday, a new car, a wedding or would you like to start investing, grow your super or reduce your debt?
Write your goals down. They should be clear, concise and actionable. For example instead of listing “I want to increase my super”, you should write “I want my consolidate my super, grow it to X amount, by X date”.
Choose realistic goals. While it’s great to challenge yourself, there is nothing more deflating than setting unrealistic goals that you won’t be able to achieve by the end of the year. When you’re listing your goals – work out how much you will need to save, taking your financial situation into consideration (your income, debts, mortgage, savings and recurring fees for things such as insurance).
Make a budget
The aim of making a budget is to map out how much you spend across different areas of your life, objectively make decisions on where you could save, spend with purpose and ultimately take control of your finances.
Start by working out how much you need for your essentials, including rent/mortgage, groceries, bills, transport. Allocate out your savings to cover:
- Your essentials
- Building an emergency fund (this should be enough to cover 3 months worth of expenses in an emergency situation, where you couldn’t rely on your regular income)
- Saving for your New Year’s goals
- Leisure activities. Enjoy your hard earned money along the way by working out how much you can afford to spend on fun activities or hobbies for yourself each month
Organise your paperwork
Go through your paperwork and throw out anything you don’t need anymore. Get yourself a filing box or filing cabinet and organise everything into clear sections to make them easy to find.
Get your debt under control
Do some detective work on your bank statements for last year and hunt out any recurring fees or direct debits that you can’t identify or are no longer relevant. If there are any fees or direct debits you are unsure of, trace them back and find out what they are. Cancel anything that you are paying for and not using, like old magazine subscriptions.
Consolidate your debts by breaking down what you owe. Prioritise by what has the highest interest rate or what you can pay off first. For stages such as this you should consult a financial planner to ensure you’re making the most of your money.
Get your super under control
Once setup, we tend to leave our super to its own devices – which can mean you’re not getting the most out of your super if you don’t review as your circumstances change over the years. Review your super to make sure that you’re getting the most out of your fund.
Tips to reviewing and increasing your super:
- Combine your super into one fund so you’re not paying multiple sets of fees. If you’ve ever worked casually, moved house or switched jobs, it is also worth finding out if you have any unclaimed super, which can be done through the ATO
- Understand the fees you’re paying and compare it to others. Check this in your annual statement or in the Product Disclosure Statement (PDS) and shop around to compare it to other funds
- Consider salary sacrificing into your super (remember to factor this into your initial budget plans)
- Review your super funds performance. Your super is locked away until you reach a certain age, accumulating and compounding. Make sure your investment returns are reflecting this
Invest in your future
The best way to save is by increasing your income. Invest in your future by working towards a promotion and pay rise at work. Ask your boss for advice on what you need to do to further your career or consider further education.
Review the year that was
If you reach your goals by the end of the year – congratulations! Take stock of what you’ve learnt along the way and challenge yourself to further improve next year.
Remember to be kind to yourself if you don’t meet your goals. Take a look back at what went wrong; did you overreach with your goals, find it difficult to stick to your budget or lose focus along the way? Learn from your mistakes, improve upon them – and most importantly ask for advice.
Contact your financial planner for advice and information on how to make sure your getting the most out of your savings.