5 financial New Year's Resolutions you need to make
If you've got bad credit history looming over you, the new year is the perfect time to sit down and evaluate what you could do better to get where you want to go in the coming twelve months.
We've put together a list of financial new years resolutions to add to your list so you can improve your personal finances for the new year.
1. Pay off your debts
Repaying debt was the top priority for Aussies in 2017, Finder reveals.1 However, it's one thing to set a goal and another to achieve it. According to Finder, almost three in five Aussies fail to stick to their resolutions.2
This new year, why not commit to paying off your debts and setting yourself up for a good financial future?
How to achieve it
This new year, 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. Rather than simply writing down "pay off debts", come up with an actionable strategy that will help you do so. Pick one big one you'd like to get rid of - perhaps the overseas trip you just returned from that you had put on your credit card - 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 to attack first to give yourself a sense of accomplishment that will propel you through the rest.
2. Put together a budget (or revise your existing one)
To improve your finances in the new year and beyond, you should definitely consider implementing a budget. If you do have one but didn't keep to it this year, now is the perfect time to take a look and figure out where you went wrong.
The new year is the ideal time to take a look at your existing budget - or put one in place to begin with.
How to achieve it
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. Brian McDonnell of PayPal Australia recommends using the 50/30/20 method. Writing in Money magazine3, he suggests allocating:
- 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.
To put in place a budget you will actually stick to, 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.
3. Save more
Why not make one of your resolutions this year to save more? You could put your cash towards the things you really want - an overseas trip, a pet, a mortgage, or a new car. Even if you're not saving for anything in particular, it's always a good idea to have savings for a rainy day should the unexpected occur.
Are you saving for your first property? Why not make a resolution to save more this year and make your home ownership dream come true sooner?
How to achieve it
Set aside a specific amount from every paycheck to go into savings, and try not to touch it. Put some of your 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.
4. Boost your financial literacy
It can be difficult to get on top of your finances if you don't know how, and according to the Australian Securities and Investments Commission, 40 per cent of Australians aren't confident managing their money.4 A great resolution would be to learn more about managing your personal finances.
How to achieve it
Get reading! Scour online resources, read magazines, talk to financial professionals and educate yourself as to the best investments to make and how to do it. Business.gov.au also suggests attending free or low-cost training and asking your accountant or financial planner questions to improve your knowledge of all things finance.5
5. Check your credit report
If you've never seen your credit report, it's time to find out what's in there! If your resolution for the coming year is to make a big purchase like taking out a mortgage or buying a new car, it will pay off to find out what is included in your credit history. It's important as it is what lenders can use to help them decide on whether to give you credit you apply for.
How to achieve it
Get your free credit report from Equifax or sign up to one of our subscription packages to find out where you stand so you can improve your finances in the new year.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
1 Finder. What Aussies really want in 2017: To be debt-free. Accessed December 2017.
2 Finder. What Aussies really want in 2017: To be debt-free. Accessed December 2017.
3 Money. Five new financial year resolutions to start now. Accessed December 2017.
4 MoneySmartAU. Financial Literacy - ASIC's MoneySmart. Accessed December 2017.
5Business.gov.au. Improve your financial knowledge. Accessed December 2017.