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.
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.
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 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.
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.