We’re going to make this quick, effective and easy, because it’s summer, and let’s face it, we’d all rather be on the beach than thinking about our money.
But it is important. That’s why we put together this five step strategy to help you get ahead – and ideally not have to think about your money again for at least a few months!
Step 1: Where are you right now?
This is simple and is about working out two key things. Firstly, how much are you worth and secondly, what bad habits do you need to cull.
You want to work out how much you earn, how much you spend, how much you have in the bank, what you own and what you owe.
From here you can work out your net worth (what you own/savings – debts = net worth).
We recommend using MoneySmart’s Budget Calculator can help you work out your financial position in a fast and easy way.
Step 2: Where you want to be
Once you’ve worked out where you’re at, it’s time to set a goal.
Imagine future-you at this time in 2019, where do you want to be? There’s not a right or wrong answer.
You might decide next year you want to be in the same spot, but have earned enough to travel overseas and return debt free. Or you might want to have saved $20,000 towards a house deposit.
The key here is to make it achievable. For example, if you want to get ahead on your debt, aim to pay off an extra $100 a month rather than a huge figure over the year.
If you need a spark, try answer these questions:
- What am I worried about in my finances?
- What would I be proud to achieve in the next 12 months with my finances?
- What am I putting off doing with my money?
Step 3: Ditch your bad habits
This is where you get to be really critical of yourself and – we like to imagine – really encouraging of future you who will never, ever waste money…
Breaking a habit is hard, but the hot tip is substitution. So, if you’re liable to buy cake with every coffee (yes, this is me), try eat before you go to the cafe.
Have a look at the “spending and debt” part of your budget and see where you can make changes.
A few thing to consider here:
- Pay off high interest debt first. Yes, credit cards, we’re talking about you. Check out our debt consolidation personal loans if you want to refinance – we save borrowers on average $5600 compared to loans from the big banks.
- Cut subscriptions: how many do you actually need? There’s always savings to be made from cutting a few of these out your direct debits.
- Once you’ve made the changes, you can direct the extra cash towards paying down debt or to building emergency savings.
Step 4: Automate your money life
There’s a few things it will pay to automate – again, this leaves more time for beach.
Automate your savings: Workout how much you can afford to save each month, and have it automatically transfer to an account you can’t easily see or touch.
Automate your debts and bills: it’s no fun paying a late fee. Set up direct debits for all your bills and debt payments and make sure there’s always money in your accounts. Paying on time is now even more important with more extensive credit reporting.
Automate your retirement: If you can afford to, consider automating salary sacrifice payments into your super.
Automate your budget: apps like Frollo, which we talk about here, will help you keep an eye on all your finances, handy if your financial situation changes.
Step 5: Kick back and relax
Well, not quite. You need to make yourself accountable.
So, set a calendar invite for yourself and spend 10 minutes reviewing this plan every month. Or even rope a friend into doing this with you. The main thing is finding a way to stick to your new goals and make 2019 a boon year for your bank balance.