The new year is obviously a time for resolutions. This year however, why not try something other than another fad diet, gym membership, or a commitment to quit partying too hard every weekend?
Financial planning isn’t something people want to think about a great deal, and it’s not the sort of revolutionary, attention grabbing thing that most new year’s resolutions are made of. However, you might find that a bit of a glance at your monetary situation could be exactly what you need to get ahead in the new year. Here are our tips for successful financial planning in 2017.
Consider your wants and needs
What do you want from this year? A new career? A car? A six-month holiday in Thailand? Perhaps just the financial stability to kick your filthy housemates to the curb and get your own place?
Putting a financial plan in place is not a one size fits all proposition; everybody is different. That might sound like a cliché, and it is, but that doesn’t mean it isn’t true. A person in their thirties with a mortgage, a dog and two and a half kids is going to need to make very different considerations than a 20-year-old student with a laptop, credit card debt and a bag of tomatoes going mouldy in the fridge.
The key is a budget. First, determine how much cash flow you know you’ll have coming in. Next, make a list of all the expenses you simply must put aside for, things you can’t delay or miss. Rent, food and bills are the obvious candidates, but you could easily have other expenses to allow for as well. Once you have that worked out, everything left over is money you can play with. This is the money that you’ll be putting towards the things you want to achieve this year. Whether this is buying a house or a subscription to Netflix is irrelevant, the point is to know what you want while also knowing how you’re going to afford it.
Odds are good that you’re currently paying some sort of perpetual fee. Insurance for example. Most people set this up and then promptly forget about it until a bill shows up. But apart from grumbling blackly and breaking out the Mi Goreng, what exactly can you do? Bills are bills, and sometimes you just need to suck it up and pay for it.
Not exactly. Insurance companies and service providers thrive on customers who never think twice about the service they’re getting and what they’re paying for it, which means you’re almost certainly not getting the best deal. However, those self-same companies are always looking at their competitors and wondering how to snatch away their customers. The easiest way is to offer a more competitive product.
Take a look at what you’re paying for insurance, electricity and entertainment and then spend an afternoon Googling better options. You might be surprised at how much you can save. If you’re not quite sure where to start, there are a host of services out there that can do the job for you, for free! Think Compare the Market, iSelect and others. Remember too that your current provider will be desperate to keep your business. Play the competitors against each other and watch the dollars fall off your bills.
Don’t ignore debt
Debt is easy to accumulate and hard to get rid of. Instead of paying the minimum amount back, see if there aren’t sacrifices you can make in your budget that will allow you to make bigger repayments. Doing so will reduce the amount of interest you pay, which means that while you might feel a bit poorer in the short term, you can be comforted in the knowledge that you will eventually come out ahead, and sooner than you would have otherwise.
Of course, not everyone can make bigger repayments on their various debts. Sometimes, there’s nothing left over after essentials. In this case, you’re going to have to be more proactive. Try speaking to a financial advisor about how you can make your money go further, or simply look at ways you can increase your cash flow. Is it time to push for a pay rise, or perhaps even start looking for jobs elsewhere? You decide.
Invest within your means
Investing your money now so that it will do more for you later is something most people do in some form or another. Apart from superannuation however, it can be difficult to get started in investing, especially when you’re asked to weigh up risk factors, return on investment, affordability and many other challenges.
That said, investing is almost always worth the hassle. However, you should be confident in your investments, and you must be able to afford it. For a young person just starting out, a long-term savings account or some small-time speculation in shares can be the perfect way in. A young person generally has less money to play with, and therefore it can be a good idea to be cautious with your investments. One too many risky speculations could easily end in a disaster from which it can be tough to recover. For more established people, a diverse investment portfolio can include shares, property, bonds and more. With more reserves to fall back on, the investments can be higher, riskier, and the returns correspondingly bigger.
Whatever your situation, the new year is the time to finally take a hard look at what you want your money to be doing for you, and to start taking steps towards making that happen.