Let's be real: most New Year's resolutions bite the dust.
Most New Year’s resolutions revolve around getting your finances under control, which isn’t a surprise considering December is one of the biggest spending months of the year (thanks Christmas!).
A recent survey by ME Bank found the most popular financial goals for Aussies this year was saving more money, spending less, reducing debt and switching energy providers. Another survey by UBank found the most common savings goal for 2020 was a home, followed by a rainy day fund (25%) and a holiday (20%).
If you got a bit carried away with your spending over Christmas and the state of your bank balance has you filled with buyers remorse, here’s how to get back on track.
Start tracking your spending
Most of us have a general idea where our money goes, like how much you spend on rent and food every week, but I bet there are transactions coming out that you may not even be aware of (oh hey there News Limited subscription I signed up for yonks ago and forgot about).
Pouring over your bank statements is kind of old school these days, not to mention time-consuming, but there are easier ways to track your spending.
Apps like Pocketbook and MoneyBrilliant will sync up with your bank account and automatically track and categorise your expenses for you so you can easily see where your money is going.
Seeing how much you're spending can be really confronting, but it's often the kick up the butt you need to get your money organised.
Get on top of your budget
Don’t have a budget yet? You’re not alone. Over a quarter of Australians don’t have a budget, according to a 2019 survey by MyState Bank, so don’t feel too bad.
Many of us prefer to wing it when it comes to budgeting and think we can figure out our spending/saving on the fly. Naturally, this approach hardly ever works.
If you’ve been tracking your spending, you can easily see where you need to cut down on any expenses, like all those forgotten subscriptions.
Senior Tax Advocate from CA ANZ Susan Franks said it’s important to set realistic, achievable goals when budgeting.
“That might be putting $50 away each pay or cutting up the credit card and paying $100 more off your balance each pay,” she said.
“Split up your financial goals into short-term and long-term. Short-term goals are achievable within six months to a year, and long-term anything longer than a year.
“It may even help to rename your bank account with the name of your goal such as ‘Holiday’ to inspire you and ensure you think twice before taking money from it.”
We’ve written an in-depth guide on how to budget for more tips.
Spring clean your subscriptions
Once you start tracking your spending you can’t help but see all your big money wasters. Don’t overlook small transactions either because they all add up.
Note to self: cancel that News Limited subscription you never use but you’ve paid $30 a month for all year…
Dump your debt
Maybe you racked up a whole lotta credit card debt buying Christmas presents or you’ve got a car loan you want to finally pay off.
Whatever it is, this is the time to write down all of your debts: what do you owe, who do you owe, what interest rate you’re being charged, and when it’s due.
Then you want to create a plan to manage the debt.
“Focusing on the smallest debts can give you a sense of achievement and keep you motivated,” Ms Owen said.
“Paying off the debt with the highest interest rate or transferring that debt to a lower interest rate may also help you achieve your financial goals more quickly.”
The longer you hold onto your debt, the more the interest stacks up which eats into the amount you could be saving for other things. Even just contributing an extra $50 to your debt payments every month can save thousands over the life of the debt.
Have ‘no spend’ days
From food and alcohol delivery to streaming services and rideshare, it’s so easy to spend money without even thinking about it. Try having at least one day a week where you commit to spending nothing - be it cash, debit or credit.
If that’s too hard, try only spending with cash rather than by card where you can. Physically parting with $50 feels way more painful than mindlessly tapping your card and it will make you think twice before you spend.
Refinance your home loan
If you put refinancing in the too hard basket last year, now is the perfect time to do it with interest rates expected to fall even further in 2020. With the lowest official cash rate on record, home loan interest rates below 3% and competitive deals on offer, refinancing your home loan should be on your to do list.
The table below displays a selection of variable-rate home loans on offer, featuring a low-rate pick from each of the following three categories: the big four banks, the top 10 customer-owned banks, and the larger non-banks.
Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Introductory rate products were not considered for selection. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term. Rates correct as at 01 June 2020. View disclaimer.
Ditch and switch your provider
What do you get when you combine summer with high energy prices? An electricity bill large enough to make you weep. How about the current rate you’re paying on your car insurance premium? Don’t feel like you’re getting a good deal on your health insurance anymore?
Don’t pay a loyalty tax: take decisive action and make the switch if you feel like your current provider isn’t giving you value for money anymore.
Sort out your super
The earlier you sort out your super, the better off you’ll be later. This is largely down to the effect of compounding where you basically gain returns on your returns over time.
But sorting out your super now means you’re also cutting down on multiple fees and charges.
All you have to do is log in to your MyGov account where you can track and manage your super, as well find any lost or unclaimed super.
Become more financially literate
In the words of Sir Francis Bacon (epic name), knowledge is power. If you don’t know the interest rate on your savings account or what an ETF is, this is the year to arm yourself with information.
You don’t need to become an expert on the stock market, but you should know how much interest you’re paying on your home loan or credit card, and when large one-off expenses are due, like your car rego and insurance so you can budget for them.
“Information is power. Get the information, write your goals down, be accountable and stick with it,” Ms Owen said.
Savings.com.au’s two cents
For many people, New Year’s resolutions are nothing more than a meaningless, cliche tradition.
But if you’re serious about getting on top of your money, keep your goals simple and realistic to give yourself the best chance of achieving them.
The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:
- The big four banks are: ANZ, CBA, NAB and Westpac
- The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
- The larger non-bank lenders are those who (in 2019) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.
In the interests of full disclosure, Savings.com.au and loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.
*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
- CBA moves to stop financial abuse via digital banking
- What’s the going tooth fairy rate?
- Westpac slashes home loan rates, HSBC edges closer to the 1% mark
- HomeBuilder winners and losers