New Year Financial Resolutions
The holiday period is usually of time of excess and enjoyment, and so the beginning of a new year is a good time to ask yourself where you would like to be financially in the coming year. These are some financial resolutions to inspire you for a more financially rewarding future.
Resolution #1: Start a Budget
Setting up a budget might not sound like the most exciting financial resolution, but following a budget is the best thing that anyone can do to improve their financial situation and start on the road to building wealth.
A budget keeps you aware of what you are spending every day. Using a budget enables to you set spending and savings targets, and to identify areas where you can save more money. You can create a budget in a spreadsheet program or a notebook, or use an app to stay organised. Record everything you earn and spend in a given time period, whether it’s a week, fortnight, or month. Review your budget every week and consider new ways to cut back on expenses. As you do so, write down your spending and saving projections for the next period.
Resolution #2: Set Financial Goals
Most people probably have a few financial aspirations in mind. These aspirations tend to be vague and undefined. By contrast, setting financial goals is about exploring what you would like to achieve in your financial life. Any goal should have sufficient specificity, measurability and a realistic timeframe for achievement.
Financial goals are different to budget projections, as they are broader in scope and time. Examples of financial goals include saving up for an overseas holiday, buying a new car, saving for a deposit on a house and growing a share portfolio.
Resolution #3: Save a Percentage of Your Income
An easy resolution to follow is to commit to saving a percentage of your income. Depending on your current income, it might be realistic to save 5, 10, or 20% of your income. Creating a budget provides insight into what is realistic for your current situation.
Once you have determined a realistic percentage to aim for, break this down to monthly or weekly amounts to be saved. Using automated payments that deduct the amount from your salary makes it simple to save and eliminates the temptation to spend rather than save.
Resolution #4: Prioritise Debt
If you have some debt to pay off, you can resolve to pay it off more strategically. Generally, aim to pay off high-interest debt before cheaper forms of debt. For example, it’s usually a good idea to pay off credit card debt more quickly, before aiming to pay off the mortgage. List your debt in order of priority and set a goal to pay off these debt amounts one by one. In some situations consolidating the debt into one single loan could a good option to consider.
Resolution #5: Learn Money-Management Skills
Along with seeking professional advice where appropriate, learning to save, invest and manage your money can help you achieve wealth or financial independence. You can learn about money management by reading books, attending seminars or doing courses that interest you. Money management encompasses a wide range of topics such as financial products, investment options such as shares and property, budgeting, tax, superannuation, estate planning and much more.