Made a New Year's resolution to improve your finances? You're not alone. Research indicates that money-related resolutions are one of the most popular goals set by Australians each year. Of course, sticking to a New Year resolution is easier said than done. So here are some ways to help you reach your financial goals in 2017.
1. Make a budget, then track your progress
Setting a budget is a key first step in taking control of your finances and beginning a smart savings journey. Budgeting (on a realistic basis) lets you establish a clear plan of action and can also help you set good spending habits. Budgets can also be a useful yardstick to track your progress over time, so you should plan to re-visit and re-assess your budget regularly. The web is full of useful resources on budgeting. Two great starting points include MyBudget and ASIC's Money Smart’s App “Track My Goal”.
2. Reduce debt where possible
If you are burdened with expensive debt (credit card, student loans, personal loans, etc.) focus on reducing or eliminating those debts as much as possible. It is nearly impossible to have an effective savings plan without that growth being eroded by interest expenses or expanding debt levels.
Don’t think extra payments can make a big difference? Here’s an example using ASIC’s Money Smart Credit Card Calculator. If you have a $5k credit card balance with an 18% interest rate and pay the minimum payments, it will take you 33 years to pay off the debt and you’ll pay $17,181 in total! By paying an extra $105/month on top of the minimum payment, you can reduce the borrowing period to 6 years and 10 months and save over $8,600 in interest.
3. Educate yourself so you’re better in control of your financial future
It’s hard to get your investments under control if you don’t understand the basics about how these products and markets work. There are plenty of great resources that can help you learn the basics of share, property and bond investments and the importance of the fundamentals like diversification and keeping costs low. A little bit of knowledge can go a long way in making the right moves today that will make a large difference over time in terms of building your wealth. A good place to start is ASIC Money Smart Tips.
4. Increase your savings rate if you can
If you’re putting $50 of each paycheck into savings, try to make it $100 if you have the capacity to do so. By making modest adjustments, you won't miss the money, and you can build up your emergency fund, retirement savings or children's education fund. Starting early and being diligent about saving can have a huge impact on your savings goal or retirement nest egg down the road. There are lots of good tools out there to help. For example, if you want to save for a child’s education expenses, have a look at ASIC Money Smart’s education help site.
5. Review your fees
As we highlighted in our earlier blog, always keep an eye on the fees you pay across your bank accounts, investments, insurance, mortgage and credit cards. This can be a tedious task, as some providers make it difficult to assess what their total fees are. However, if you can carve out some time to read the fine print, you will probably realise that you’re overpaying on several fronts and can reduce your costs significantly. This can make a big difference over time.