DID you make a new year's resolution to cut down on your spending? Pay back some of that debt?
Making a financial goal for the new year is common but many Australians lose focus within the first 3 months.
Setting realistic goals, being consistent, monitoring progress and using a system that works are key steps in making resolutions a reality.
David Rankin, award-winning bank manager and founder of personal budgeting service Sort My Money, shares his top five tips on how to create a New Year budget that sticks.
1. Document current spending
"Invest some time to document your current spending. Before anyone can embark on a journey, they need to know the starting point. Documenting expenditure identifies which outgoings can be reduced and also prevents impulse spending. The effort you put into this process now will pay dividends in the future, as it is a vital part of gaining control of your spending habits."
2. Pay cash for day-to-day purchases
"Spending money on everyday necessities such as food, drink and petrol tends to be more erratic than the payment of bills and debts. Making these day-to-day purchases with cash, as opposed to plastic, will render them more consistent and forecastable. Nothing distinguishes between needs and wants faster than handing over a fistful of fifties at the supermarket checkout each week."
3. Save for unforeseen circumstances
"Allow yourself a regular back-up amount for discretionary and emergency spending, such as clothes purchases or unforeseen medical expenses. By keeping these funds in a dedicated account, they will remain separate from your day-to-day living expenses, and you will be more likely to use them for their intended purpose. This builds much-needed flexibility into the budget, which transforms it from a theoretical exercise to one which corresponds to real life."
4. Include events in your financial calendar
"Christmas, birthdays, anniversaries, Father's, Mother's and Valentine's Days all have a habit of sneaking up on people's finances throughout the year, but this doesn't have to be the case. Treat each of these events just like any other annual fixture in your financial calendar and pencil it in a couple of weeks prior to the actual date. This will enable you to prepare for and enjoy each one, instead of acting at the last minute, which can end up costing a lot."
5. Make a realistic and sustainable budget
"The very act of putting together a budget has the potential to benefit your finances by making them more sustainable if you are willing to take a constructively critical approach. This is because the process itself involves assessing whether various financial commitments are worth the investment. For example, was that expensive monthly insurance policy sold to you for your own good, or was it more about someone else hitting their sales targets? Compare the features and prices of products offered by other insurers to make sure you're getting the best value. Is that fortnightly gym direct debit giving you value for money even though it's been so long since you've been there? How free can an interest-free credit card really be if it is charging monthly account-keeping fees?"
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