Top 5 New Year’s Financial Resolutions
On the cusp of the new year we look back on one of most extraordinary years of our lifetimes, with the full economic impacts of the Covid-19 pandemic remaining to be fully revealed over the next months and years. Financial uncertainty remains a source of concern for many, particularly those whose livelihoods have been affected by job losses and a reduction in income. But we take hope from the solidarity and cooperation shown by our ‘team of 5 million’, and as we pull together as a community there are things we can do as individuals and family units to help put our best foot forward as we head into 2021.
For those of us who enjoy the challenge of New Year’s resolutions, here are our top 5 financial resolutions for 2021 to maximise every opportunity we have to get on a more positive financial standing.
1. Creating your resolutions
The first resolution is to write a clear and concise list of your resolutions! Don’t rely on your memory and good intentions but write down, in your own words, your goals. We all know the importance of goal-setting and having a clear vision – if we don’t know where we’re going, we’ll probably end up somewhere else altogether. For example, you might write down a goal such as, “I will put aside $20 from every pay into a separate savings account to fund presents and a holiday for my family at Christmas time 2021”. This leads us into point 2, automating our savings so we don’t even have to think about it, it just happens behind the scenes:
2. Setting up Automatic Savings with your bank
Something you can easily set up yourself on your online banking is automatic payments from the main account that your income is deposited into, to another of your accounts that is a dedicated saving account. There are no extra fees for setting this type of payment up (it’s not a direct debit), it’s simply a regular payment between your own account with a repeat payment frequency set. The key is to set up the payment to always occur immediately after your regular main incoming payment arrives, be it pay from your work or a benefit payment – as long as you can depend on it always being on time. It doesn’t need to be a big amount either, it’s important to set small realistic goals and build up to bigger goals. The key is to just set it up and forget about it, you’ll be surprised how quickly it starts to grow, and how you don’t miss it from being available as disposable/spending income.
3. Get out of debt
Don’t put your head in the sand when it comes to your debts. Face up to it and make a financial resolution in 2021 to get in control. Being in control of your debts doesn’t necessarily inventing a scheme to clear them quickly, remember that slow and steady wins the race. Being in control of debt means committing to never missing a payment, and treating personal loan repayments as being as important as making a rent or car payment. If you are repaying a loan, mark down repayment dates on your calendar and make it a priority to ensure that you ALWAYS make your repayments. Clearing debt brings an incredible sense of accomplishment, improves your financial discipline and money-handling maturity, and frees up finances to go towards saving or spending on true and pressing needs such as fixing the house or car to prevent greater costs further down the track.
4. Use a budget
We’ve written several articles about budgeting on our financial advice blog. There are many tools and resources available to help you budget, including apps for iphones and android devices for those of us with our feet planted firmly in the digital age. If budgeting has always been difficult for your, we’ve heard more and more feedback that using the envelope system is a practical real-world way to prevent over-spending each month. This involves taking money out at an ATM and dividing it up into envelopes that each represent a spending category such as food, entertainment, clothing, etc. Increasingly online banking is introducing tools that breakdown spending into categories, to help you identify specific categories that need spending reductions.
5. Improve your Financial Intelligence
If you’ve ever had a gym membership, can you remember the first time you ever did a work out? There was so much to learn about how to use the machines properly, and how to decide on the right workout exercises and how to perform them. We certainly didn’t assume that we would have a built-in knowledge about everything that meant we could immediately move to pro athlete levels of training. The same principle applies to financial knowledge and experience. Without any ongoing training and guidance from the experts and gurus, it doesn’t make sense to expect to magically become a money-whiz ourselves. Make appointments in your calendar to read a financial book or article online each month. Visual learners can search Youtube for a personality you enjoy watching and learn that way, or auditory learners can play a money advice podcast. In an age when we have more helpful resources than ever before at our disposal, there are no excuses when it comes to self-guided education.
by Ash Horton
December 30, 2020