How to get on top of your finances in 2018
The start of a new year is often a time to think about the things you want to improve about your life with saving and getting on top of your finances one of the most common new year's resolutions. Financial plannerLiz Koh has some advice to get you started.
What small changes can people endeavour to make in 2018 to kickstart getting their finances on track?
There are two things that are really important to do at the start of every year. First, take stock of your financial position so you can plan for the year ahead. Add up your assets – house, car, savings etc – and subtract your liabilities – mortgage, car loan, overdraft, credit card and store card debts. The difference is your net worth. If you are on track, this number should be getting bigger every year. If not, you need to make some changes!
Second, set up an automatic transfer every payday into a savings account. Start with an amount you know you can afford and try increasing it over time. Use your savings to build up an emergency fund, and once that is done, focus on paying off debt and saving for short term goals.
People are constantly bombarded with different financial advice, what advice would you give to someone feeling overwhelmed by it all?
When it comes to managing money, there is no right or wrong way of doing things. Each person has a different financial situation and different attitudes and beliefs about money. Only you know what is best for you. At all times you should be aware of the consequences of the choices you make. If you choose to spend more now, you will have less to spend later on. If you choose to take risks with your money, you may lose it. If you keep an eye on the future and understand where you are heading you are much less likely to make mistakes.
How would you recommend people get through the times when they feel like reverting to former spending habits?
There are two keys to keeping your spending under control. The first is to have very clear, achievable savings goals – perhaps a deposit for a house, a new car or paying off a loan. Every time you are tempted to spend, remind yourself that spending will make it harder to achieve your goal. People who don't have goals have less incentive to save. The second key is to manage your money automatically by having separate bank accounts for essential spending, non-essential spending and saving. Put money into your savings account on the day you get paid, before you get a chance to spend it.
Any final advice?
Checking on your financial situation annually is not often enough. Make a date with your money! Put an appointment in your diary to review your finances at least once every three months and preferably once a month. There is a saying that "what gets measured gets done". Keeping track of your progress towards achieving your financial goals will help you maintain good habits and get there faster.
Written by Liz Koh. First appeared on Stuff.co.nz.