It’s a new year … so why not make the most of it?

We often set new years’ resolutions in January. We usually focus on improving our health, social life or fitness. Why not apply the same good intent – and hopefully more staying power – to setting some goals to improve our financial health in the new financial year starting on July 1?

Over the next few weeks, we’ll share some simple, but powerful steps you can take to get your financial fitness looking better than ever!

1.    Set a goal … and develop a plan 
If you go to a gym or work with a Personal Trainer, you will know how important it is to set a goal. Your coach will work with you to achieve that goal. They will develop a plan and work with you over time to achieve success. The same applies in relation to your finances. 

Setting your financial goals puts you in charge of your money and your life. Your goals can be short or long term, small or large, but they all need to be achievable. The first step to getting sorted is to work out where you want to be financially and what your priorities are.

Define your goals 
Be specific, realistic, and write down your goals. Keep each goal simple and give it a timeframe and a dollar amount.

• Set some big goals - like buying a home in the next five years or saving for your retirement (this could be your biggest goal of all).
• Set some smaller goals to help you get there – like saving for a deposit or paying off your credit cards.

Identify the actions required to achieve them 
Actions are the steps you take to reach your goals. Here are some examples:

• If your goal is to save for a house deposit, your action may be to open a savings account by next pay day and save $50 a week into this new account.
• If your goal is to save for your retirement, your action might be to talk to your employer about increasing your contributions to super or make your own personal contributions.
• If you pay your mortgage monthly, your goal could be to change to fortnightly repayments of at least half the amount you were paying each month. This will pay off your mortgage faster and save on interest.

Review your goals
Review your progress every six months or once a year, on a specific date written in your diary or calendar. When you achieve a goal, celebrate! Then set yourself a new goal. New Year is a great time to think about your goals – write those resolutions down!

2.    Review the costs associated with debt
Financial goals are often about saving or paying off debt: 
If you have high-interest debt, like credit card or hire purchase, your main goal should be to pay that debt off first and as soon as possible. This could involve re-structuring your debt into lower-interest loans.

If you have a mortgage and can afford to increase your repayments, your goal may be to save on interest by paying off your loan faster.

There are constant changes in the finance industry, in the products and services available and in the fees associated with them. An annual review may uncover ways to reduce these costs:

• Aim to minimise your debts. If you have a home loan, it’s time to look at your progress.
• What has been the change in your loan balance from a year ago to now?
• Are you able to increase your payments or frequency of payments to save interest?
• With interest rates changing, should you refinance for a better deal?
• Make a call to your bank and tell them that you are shopping around for a better deal.
• Ask them if they can offer you a better interest rate because in most cases they would prefer to keep you as a client, than see you take your loan to another bank.
• If you have any personal loans, outstanding amounts on your credit cards or other debts currently being paid off, it’s time to consider ways to reduce these.

Once you have reviewed these major expenses, it is wise to set a budget.

3.    Set a budget
A budget is one of your best tools for reaching your goals – whatever your age or stage in life. It’s a plan of what money you expect to receive and how you expect to spend it. To achieve financial fitness, you need to set yourself a budget and stick to it. Without saved funds to invest, you have no investment strategy.

Everyone can benefit from a budget. It’s not just for people who are having trouble making ends meet. 

If you’re spending less than you earn, use your budget to work out how much you can put aside each pay to improve your financial position. We call this ‘paying yourself first’.

If you’re spending more than you earn, use your budget to see where your money is going. Then see if there are any ways you can cut your spending or increase your income.

Your budget needs to be accurate or it won’t work. Give yourself time to get all the information you’ll need, including:

• A record of your day-to-day spending. Keep receipts from your shopping, and gather up bank statements and bills from the last three months. These will show regular expenses like rent, mortgage, credit cards, phone, power and insurance.
• A list of annual costs. Think about things you pay for less regularly like vehicle licensing, medical expenses, gifts and holidays.
• Your income details. A list of any money you get such as your pay, benefits or allowances, superannuation, pension or interest earned on savings.
• Savings. Details of any regular savings you make.

So, that’s the starting point … why not have a look at your personal situation? You might be surprised at the opportunities available to you.

If this is all too difficult to do alone, why not schedule a meeting with a Knightcorp financial adviser now? 

Disclaimer
The advice is general in nature only and does not take into consideration your financial situation, goals or needs. Before making any investment decision you should consider the appropriateness of the information to your circumstances and obtain a copy and read the Product Disclosure Statement. Please seek expert advice prior to acting on this information.