06 Dec 6 financial resolutions to fatten your wallet!
While sitting down to plan your New Year’s resolutions for 2017 it’s a good idea to include some detailed money goals on top of the usual “save more money”. Here are some ideas you might like to consider, and some tips on how to achieve them.
1. Live beneath your means
Want to improve your financial situation, but don’t know where to start? Start by tracking where your money goes and see if you’re living within your means. Many people have only a vague idea of what they spend their money on and can often experience quite a surprise when they realise exactly how much they are spending and in what areas.
The first step is tracking your expenditure to give you an idea if you spend more than you make and where you can cut back. There are any number of apps available, some of which even feed into your bank and credit cards to get up-to-date, actual information such as Pocketbook, Dollarbird and ASIC’s Track My Spend app.
2. Set up an Automatic Savings Plan
If you’ve made a financial resolution to save, using automated savings force you to follow through because the cash is drawn directly from your bank before you can get your hands on it. The beauty of compound interest means these forced savings can really add up quickly if you don’t dip into it.
Automatic savings plans easy to set up and available through nearly every financial institution from everyday banking to super and investment funds. You can set them up yourself online, by calling the institution or by asking your adviser to set one up for you (for investment and super funds).
3. Prioritise Your Debts
Not all debt is equal. Make a list of your liabilities and organise them by the annual interest rate. Those with the highest rates (most likely your credit card debt) should be paid off immediately. It does no good to invest money while you are paying 19% or more in interest each year.
4. Review, review, review!
It’s much easier and beneficial to make small, regular tweaks to your overall financial plan than ‘set and forget’. There are a few key areas we advise our clients to check in with on an annual basis or as their circumstances change:
- Insurance: as your adviser we review your policy with you every year at renewal time however it’s a good idea to be aware of when to contact us to review your death and disability cover. Find out more here
- Wills/beneficiaries: it’s important to remain on top of who is in charge of your estate and who gets a portion of it when you pass away. As circumstances change and things like blended families become more common it’s incredibly important to have your Estate Planning properly structured and regularly reviewed. With the help of our Estate Planning solicitors we can ensure the right people get their entitlements with minimal tax implications at the right time. You can find out more about the complexities of Nominations of Beneficiaries here, and why it might be a good idea to get our help if you’re not sure.
- Financial plan: for clients of ours we do a comprehensive review each year however, once again, if you experience a change in circumstances or there is a big shift in the market it’s a good idea to keep on top of and review your investment strategy and overall plan to help you achieve your goals long-term.
5. Read a Financial Book Each Month
If you want to learn to cook, you read cookbooks. If you want to learn to fix an engine, you ask someone to show you. One of my friends has made it a habit to read a chapter of a book per night, or as he says, learn something new about money each day. Consistently applying yourself to learn as much as you can about the financial markets, the nature of money, and investments in general, is absolutely essential to creating long-term wealth and will help you become more confident and empowered when making short and long-term money decisions.
6. Get on the same page with your other half
If you’re married or living with someone, there’s a good chance that your finances are tied up together or you at least share some financial obligations, such as paying the rent. This can sometimes lead to tension. More than a third of couples said finances are the primary cause of relationship stress in a survey in 2015 from SunTrust.
Getting everything out in the open, such as debt, salary, credit scores and spending habits before making a huge financial decision so no nasty surprises come up (like getting turned down for a mortgage) will reduce overall relationship strain. Together, figure out how you will manage financial obligations, determine what financial goals are most important and set up a plan to reach those goals. If circumstances change, such as a job loss, a new addition to the family or a major inheritance, being on the same page from the get-go will really help with management of the change for both of you.