Financial Resolutions and how to keep them

According to a report from the University of Scranton’s “Journal of Psychology”, only 8% of people keep their New Year’s resolutions, in fact many break their resolutions within the first week. When it comes to setting financial goals, the trick is to be realistic about what you can achieve in a given amount of time.

Firstly, it is important to understand how you feel about money and how these feelings effect your financial decisions. Are you uncomfortable discussing money with your partner? Why do you feel content spending money on vacation but pay your phone bill at the last minute? Understanding these feelings may provide the answers to why you have fallen short of your financial goals in the past and how to stay on track this time around.

Get Comfortable

Dedicate time to learning about money, talking about money and maintaining a financially healthy life. Go through your current finances and put time aside to understand your financial position. If you have a partner, do this together.

Understanding your partner’s financial motivations will ensure you are able to grow together and stick to a budget that suits both of you. Does this sound like a slow kind of torture to you? Remember, money is only a dirty word when you don’t have control of it.

Educate Yourself

Does your bank charge you a loan servicing fee monthly on your mortgage? Do you know what percentage of the interest charged on your home loan accounts for this?

Find out. If there are any charges you cannot account for, find out what they are and why you’re paying for them. Banking language acts to keep every day customers ignorant. Learn the lingo.

Get Organised

Get your financial documents in order. Do you still get paper statements? Where are all of your insurance documents? Credit card information? Put all of your financial documents in one place, organised in such a way that you know exactly what you have and where to find it.

Create a budget

Add up all of the income coming into your house and deduct all of the spending going out. There should be a surplus of money left over to go towards your financial goals, to pay off debt faster and to save for your future. If this is not the case, work out why.

Plug Holes In Your Spending

Where are you leaking money? How much does that latte every morning cost you over a week? a month? a year? Do you buy lunch every day? Know where all of your money is going. Be honest. Go old school, pull up your statements online at the end of every week and read them. Reconcile your purchases. Not only will this keep you honest. It will also help you spot any discrepancies. Did the paywave receipt you declined at the service station say $250 or $25 for that tank of petrol? Know where every cent went.

Set Financials Goals

The surest way to fall short of your financial goals is to make them unattainable. If you’re going to keep your morning latte, make lunch at home and bring it to work.

Resolve to only go out to dinner once a fortnight instead of two nights a week. Set SMART goals; Specific, Measurable, Realistic and Time-Bound. Want to go to Fiji at the end of summer? Great! Set a short term goal. How much money do you need by when? What can you do each week to achieve this? Maybe you want to replace your car in the next three years or pay off your house. Write these goals down as short-term, mid-term and long-term. Monitor your progress and re-evaluate these often.

Circumstances change, as should your goals.

Go Electronic

When interviewed by Tom Anderson of Forbes magazine, Stacy Francis, a financial planner in New York City, said ‘the key to resolution success is to automate as much as possible.’ By setting up automatic payments into savings accounts the funds are gone at the same time or just after your pay hits your account, leaving you to work with whatever is left over. By separating funds this way, impromptu spending is more easily curbed and savings patterns are established with minimal effort.

Know what you are worth

To find out what you should be earning, look at vacancies in similar roles online to see of you are on par with your peers. Maybe it’s time to negotiate for that pay rise.

Set goals to grow your income.

If your income isn’t growing, based on inflation alone you will make less money each year. Unsure how to do this? Make a resolution to learn more about investment. Make an appointment at one of the many financial planning firms offering free first appointments. Know your current financial position and find out what options are available to you. Do the same at your bank.

Do regular financial health checks

Is your transactional account charging you a fee every month? Have you had the same mortgage for ten years? The type of home loan you established when you first bought your home might not suit your current needs. Do you have a lot of personal debt? Maxed out credit cards or a car loan? Consider topping up your mortgage or redrawing. By shifting your personal debt from the average 19-22% credit card interest rate to your home loan, you may pay less interest. If approved to keep your credit cards, drop the limit down to a lower amount.

Make your credit cards work for you

Is your credit card on a rewards program? Consider using it to pay for all of your normal expenses, stick to your budget, and pay it off in full each month. By doing this you are earning points that you can use for travel and online shopping while avoiding the interest. Maintaining and paying off your credit cards demonstrates good serviceability for future lending. Talk to your bank about your options.

Fall Down, Get Up

A surprise engagement, a friend’s birthday, the quick drink that turned into a big night out. These surprise expenses are inevitable curve-balls thrown up when we are out living our lives. Don’t punish yourself if you slip up in June. Get back on track in July.

Be sure to acknowledge the steps you’ve already taken. You’re on your way.

Remember to revisit your goals if you experience a major life event such as marriage, the birth of a child, retirement or divorce and know that there isn’t any one specific path to achieve financial health, it’s a process.

 
Haylee Read CONTRIBUTOR

Haylee Read CONTRIBUTOR

 

Reasons to Start a Side Business

Battling that student loan? Trying to whittle down that credit card debt? There are so many people in debt and struggling to stay afloat. Tackling your finances is hard enough for the debt-free but having multiple elements of debt adds a whole other range of difficulty to the task.

It's the usual idea of 'decrease your expenses, increase your income' but for a lot of people, it's simply not that easy with high rent and low wages.

The solution is a side business, something you can run outside of work hours that can bring in funds on top of your standard 9-5 income (and potentially become your future career if that's what you're aiming for.)

Apart from being a way to keep you from going entirely insane, here are a few more financially oriented reasons to start a side business:

Increase your income

Working more than one job has attracted a stigma of poor decisions and poorer lifestyle and such many are loathed to take on a second or third job and complacently struggle away. It doesn't matter what you're doing (though I'm not sure you can pull off a lemonade stand at your age unless its organic, gluten free, sugar free, carb free, paleo, flavour and preservative free lemonade prepared in a commercial skitchen and meeting all qualifying food standards, but there are businesses or jobs you can create or take on to bring in additional income. The teen jobs: babysitting, housesitting, cleaning, delivering brochures, working at a fast food joint or retail store. The adult jobs: contracting your services out of hours ie mowing lawns, doing people's taxes, helping overseas companies with their IT support since your night time is their day time, selling your things, affiliate marketing etc. The entrepreneur: creating your own contracting business, selling goods, creating something out of thin air that changes the entire plain of business as we know it - do the last one, it'd be nifty.

Pay Down Debt

If you're constantly in the red, using overdrafts to pay off overdrafts or credit cards to pay bills, you're in an endless cycle of debt. If you've already tried restructuring your debt with bank loans, starting a side business allows you to chip away at it that much faster. Once the debt is gone, it's far easier to 'save for a rainy day' or for that house deposit and it'll also make it oodles easier to just get through the month without the struggle.

To Change Careers or Start a Business

If you're looking to change careers, you could be out of a job for a few months and even then, depending on their pay cycles, you could be without an income for up to a month. Similarly if you're starting a business, you'll need a lot of startup capital, even if it's not for the business specifically as you;ll have your everyday expenses to cover while you're out of work, preparing to make your millions. Having a side job helps you to make the transition a bit easier, helps you to save and can potentially become that new startup you're planning once you have the funds to put your full focus on it.

To Save For a Specific Goal

Need a new car? Want to go on a holiday? Saving for a house deposit or startup business? How about just an emergency fund for if your cat needs surgery or something breaks down and needs to be fixed immediately? A side job helps you to save because it's money that you otherwise wouldn't have. Set up a separate bank account and have the income from your business or second job go directly into that account. Opt for a high interest or term deposit account to ensure you won't touch it (because if you do, you lose out on all the interest and sometimes get charged a penalty fee). In no time, you'll have a great, growing fund of accessible cash (but not too accessible).

On a non-financial note, a side business or job is also a great way to explore your hobbies in a more professional and passionate capacity. If you love fashion and love to style people then set up a styling business for yourself, contract yourself out to friends and coworkers and start by making a name for yourself. Not only is it a great way to build your brand before you officially launch but it's also a good way to work out if this business is something you can wholly commit to without losing your passion.

Try it out, the average millionaire/billionire has seven streams of revenue. Seven. You can start with two.

Financial Goalsetting

When trying to set financial goals, rather than solely relying on the ultimate goal, create short, medium and long term goals so that you can celebrate your small wins along the way. Setting one ultimate long term goal is often difficult to maintain because you can’t see how the spoils of your labour.

Immediate Goals (Short-Term) Start with immediate goals such as saving for that new phone or a vacation so that you can see your progress and celebrate your first win – it’s easier with short term goals if you can visualise what you need and then see yourself achieve it.

Emergency Fund Ensure that you always have enough in savings to fund 4-6 months of expenses in case you find yourself out of a job or your pet needs urgent medical care which is often paid for out of your pocket before it is eventually reimbursed (if you have pet insurance, which leads us to...)

Have the Basics Covered Make sure you have insurance – it makes it a heck of a lot easier to pay for emergency costs if you’re insured. Pet insurance is inexpensive yet is a total lifesaver when it comes to vet costs or forbid, urgent medical or surgical costs. Similarly, private health insurance can help fund doctors’ visits, x-ray and prescription costs as well as getting you a better level of healthcare. The rest of the insurances options are self-explanatory but if you manage to book them all with one provider, you’ll find you get even further discounted rates.

Medium Term A medium term debt could be to pay off debts like a credit card bill or student loan which can be paid in manageable installments. If your goal is a down payment on a house, then set yourself interim goals rather than the total figure, for example, achieving $15,000 at a time is easier and more mentally rewarding than struggling to reach the full $150,000.

Budget Backwards Work backwards from your goals to work out how much you need to save each pay to achieve it. Be realistic, don’t think you can save every cent of your pay because if you restrict yourself too much you’lll find you won’t be able to save for long and you’re more likely to give up. Aim to save say 10 or 20% of your pay and as you get more comfortable, increase it to the next level you can handle.

Visualise & Self-Motivate Create an inspiration board of your goals so that you can visualise yourself having achieved them. This can be as simple as a collage of images of a specific car if that’s your goal or as detailed as a visual diary of the life you want to live and the elements that make that up. For us, when we were house shopping, that included pictures of home interiors we loved with photos of us superimposed into the rooms like we were already living there. Quirky, silly but wholly effective. The clearer your vision, the more motivating it is and the easier it is to achieve.