We’ve all had the experience of starting the new year with good intentions, whether they be to take up running, cut out coffee, or just drink more water each day. These resolutions start well for a while, but our resolve often starts to fade if we haven’t created a new habit or lifestyle around the changes we want. While these tips might indirectly help you to tackle the other goals you ambitiously set on New Year’s Eve, our real buzz comes from helping you make sure your financial goals are different.
In our last post, we looked at how to make 2017 your best money year yet, by putting a plan in place to support you in building your empire. Here we explore how to ensure you actually achieve those financial goals for 2017.
Get real with your financial goals
Financial resolutions are as varied as our lifestyle ones and run the gamut from building up savings and paying down the mortgage effectively, to consolidating Christmas debt and managing (or getting rid of!) credit cards. Whatever you’re trying to achieve, the first step is to get real about it. Realism (or rather, a lack thereof) is the reason that most New Year’s resolutions fail. You’ve got to be realistic about where you are now and what is possible. For a start, your financial goals probably shouldn’t depend on a Lotto win. That would be awesome, sure, but if you’re to get any closer to building your empire, you need to work with what you’ve actually got – right here and right now.
Create a budget that enables you to see what resources you have and then map out a timeline as to what the utilisation of those resources will mean. This can also be a great way to consider the best option in terms of an action plan. For example: if you saved X amount per pay, it would give you Y over the year, versus if you increased that payment to X, it would shorten your debt pay-down term, saving you Y overall.
Talk to an expert if you’d like help with scenario planning to get you closer to your goals. Whatever path you take though, there are some tips that will help you get to where you’re going faster.
Ch, ch, ch changes… to ensure positive progress
- Cut the coffees: No, don’t worry, we haven’t gone back to the lifestyle goals here. This suggestion is, in fact, financial (and it’s not overly concerned with your caffeine intake either!) What this point comes down to is minimising your discretionary spending. Looking for little ways to save small amounts here and there will get you closer to your savings goals, and enable you to put your extra pennies to more positive use. A latte or mid-afternoon macchiato might not seem like much, but that $5 a day is quickly becoming at least $35 each week, or over $150 out of your monthly pay packet. It’s not about depriving yourself, but consider whether that money could be serving you better somewhere else? Keep the coffee to a more occasional treat (or just make more at home or at the office) and see how another $100 a month (or $1200 a year!) can get you where you are going faster.
- Resist temptation: This is like the theory around not having chocolate in the house if you’re trying to abstain. Credit cards can burn a hole in your wallet; luckily not literally, but in enough of a way that they create bad debt. Stash your credit cards where you can’t access them easily and plan to pay cash for things. A study by MIT found that people save 20% when they begin paying with cash, as they become more contemplative about their purchases.
- Window shopping: Shop around to ensure that you’re getting the best deals financially. Just because you originally got your mortgage or credit card from a particular vendor doesn’t mean you’re wedded to them for life. You don’t have to stay loyal, particularly if they’re not now providing you with a good deal. The market changes and it’s OK to pressure your provider to keep up. Know what your options are and use competitive rates to negotiate with your current vendor, or switch to another if they won’t sharpen their pencil. Sound like hard work? No worries – that’s where we come in. We’re here to help you restructure your debt to get the best deal possible.
- Perk up your payments: With the money you’re saving in other areas (on discretionary spending and through better rates), you’d be well placed to increase your payments. With better rates, the bank might scale down your minimum mortgage amount, but keeping those payments the same (or even picking them up a bit!) will enable you to pay down debt more quickly. The same goes for credit cards. There are two pay-off strategies that people opt for; the first and fastest overall – which is also best for a ‘debt payoff snowball effect’- is to funnel any extra money into the card with the highest interest rate, while paying the minimum on the others. Once the first card is paid off, you can apply this same method, for your spare money, to the one with the next highest rate and so on. Alternatively, you could pay off the card with the lowest balance first. This isn’t the most cost-effective way to get out from under debt, but the (relatively) ‘quick win’ can provide a psychological boost – and we all like to feel like we’re winning!
Wherever you want your finances to take you in 2017, a little energy and focus can go a long way. Get your finances fighting fit now and you’ll be set to achieve your goals. Then you can tackle those other resolutions…