Most of us are partial to the odd New Year Resolution but financial resolutions are really about goal setting. We suggest getting serious and writing them down if you want to see a successful outcome at the end of the year.
Psychology professor Dr. Gail Matthews, at the Dominican University in California, led a study on goal setting with nearly 270 participants. The results showed that you are 42 percent more likely to achieve your goals if you write them down.
Writing your goals down not only forces you to get clear on what, exactly, it is that you want to accomplish, but doing so plays a part in motivating you to complete the tasks necessary for your success. The process of putting your goals on paper will force you to strategise, to ask questions about your current progress, and to brainstorm your plan of attack.
Paying down debt, contributing to your retirement plan, and making a sound budget are all ways to ring in the new year with better financial health. Here are our top five recommendations for your new year plan:
PAY OFF A DEBT
Commit to paying off your debts so you are less likely to have defaults listed on your credit report, which may risk potential loan rejection when you apply for credit. Pick one big one you'd like to get rid of and decide how soon you want to pay it off, setting up automatic payments to ensure it happens.
Alternatively, choose a small debt you know you can pay off. This will give you a sense of accomplishment that will propel you through the rest.
PUT A BUDGET IN PLACE
Putting a budget in place is very straightforward. You can do it yourself with Microsoft Excel, or use any of the multitude of online tools or smartphone apps to help you out. We recommend using the 50/30/20 method:
• 50 per cent of your income to essential costs such as rent, bills, transport and food • 30 per cent to spending and personal expenses • 20 per cent to savings, paying off debt or investing
It’s also important to be realistic, and to allow flexibility to adjust where necessary. Account for unexpected events that may crop up from time to time by having a buffer in place.
PUT A SAVINGS PLAN IN PLACE
Set aside a specific amount from every pay to go into a savings account and try not to touch it. Or you can put some money into a term deposit to lock it away for a certain amount of time and accrue more interest or invest in other options such as shares or managed funds. This is where a financial adviser comes in handy, as they can help you put your money where it will perform best.
INCREASE YOUR SUPERANNUATION CONTRIBUTIONS
By contributing extra, you can grow your super. Even small amounts add up over time. You can ask your employer to pay a portion of your pre-tax salary as an extra contribution to super (concessional contribution). This is commonly known as a salary sacrifice. It can be tax-effective if you earn more than $37,000 per year.
PUT SOME MONEY ASIDE FOR 'A RAINY DAY'
It is a good idea to build an emergency fund. This is different than a savings account. It’s money you put aside in case it is needed urgently. None of us know what’s around the corner. If you lose your job, your car breaks down, or you encounter an unexpected expense having an emergency fund makes these events easier to deal with.
It also means you don’t have to fall back on credit. Ideally at least 3 months of expenses should be in your emergency fund, however as much as $1000 can provide great peace of mind.
General Advice Warning: The information provided in this article is general in nature and does not take into account your particular investment objectives, financial situation or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.
Dobbrick Financial Services (Gympie) Pty Ltd ABN 48 931 205 109 & DFS Oakland ABN 64 340 527 395 and their advisers are authorised representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
