The start of a new year always signifies an opportunity to reassess, refresh and make the coming year your best yet. But sometimes, lost between new gym memberships and healthy eating vows, one particular area of your life may be overlooked: financial wellness.
Last year was an unpleasant cocktail of interest rate hikes, rises in the cost of living, inflation, and ongoing turbulence in the property sector. And with these factors predicted to hang around throughout much of 2024, your best defence is being prepared.
Ready to become a master of your financial destiny? We have ten tips for navigating the new year with newfound financial confidence.
- Check in with your current financial wellbeing
Before you do anything, understand what financial wellbeing looks like, how you performed against your 2023 goals (if you had some) and where you are sitting currently. According to research from the University of Melbourne and CommBank, financial wellbeing is defined as the ability to:
- Meet your financial obligations, e.g. pay bills and expenses.
- Freely make choices that allow you to enjoy life, e.g. take regular holidays.
- Control your finances, e.g. avoid unnecessary fees and charges.
- Feel secure about your future obligations, e.g. make choices that enable you to put away money for the future.
If you’re unsure where you sit, take this 5-minute quiz and find out your financial wellbeing score.
- Set goals for the year ahead
Armed with the knowledge of where you currently stand and where you could have done better in 2023, it’s time to set some goals for a prosperous year ahead. It can be helpful to break your goal setting into short-term goals (0-12 months), mid-term goals (1-5 years) and longer-term goals (5+ years) – with the short and mid-term goals acting as milestones towards achieving your longer-term goals. This can include short-term goals of sticking to a budget to increase your savings, enabling you to reach longer-term goals like a big overseas holiday, buying a first home, or even saving for retirement.
If you’re already equipped with well-established goals, look at ways to get them working harder – you might be able to check them off sooner than you think.
- Break up with debt
Debts come in all shapes and sizes, with varying terms, interest rates and intricacies. While it’s not always possible to completely end a relationship with debt (mortgages, we’re looking at you), minimising these and shopping around for better terms can significantly impact your financial wellbeing. Get in the habit of checking that your bank or financial institution is still giving you the best possible deal. If you’ve built up equity in a property, it might be worth a valuation to ensure you’re receiving a competitive rate. Your local real estate agent can provide a free property valuation to give you an idea – but you’ll need one from the bank, too.
Make clearing debts a top priority, and put strategies in place to help you get them under control – it’ll minimise financial stress, improve your credit score, and overall, set you on the path to financial freedom.
- Don’t neglect your paperwork
While keeping meticulous financial records may be dull, you won’t regret it come tax time – particularly if it leads to savings. For business owners, this includes tracking and claiming expenses, depreciation, and deductions on charitable donations. Both business owners and individuals will also benefit from filing and paying their taxes on time, avoiding penalties. It’s helpful to have a good accountant on your side; they’re experts in tax reduction strategies that ensure you’re paying your fair share while maximising your take-home income.
Having a tight handle on ongoing expenses throughout the year also gives you more visibility into any financial sinkholes that could be avoided.
- Be prepared with an emergency fund
Life can be unpredictable, so having a financial safety net is a smart way to protect yourself from unforeseen, life-altering changes. These can be anything from major employment changes to health issues, unexpected relocation, or stumping up for a new car.
Most financial advisors recommend saving three to six months’ worth of cover for essential living expenses – which can seem like a lot – so start small and build it from there. Here’s how:
- Set your target.
- Include it in your budget.
- Set up an automatic payment going to your emergency fund.
- Redirect a portion of any bonuses or windfalls into the fund.
- Watch it grow.
- Adopt a budgeting strategy to suit
One size doesn’t fit all when it comes to managing finances, and you’ll quickly discover some strategies that gel for you and some that repel. A solid strategy that resonates can help you save money, reduce expenses, and maximise your income. Some popular budgeting strategies to try are:
- The 50/30/20 rule – this budgeting method gives you a loose guideline for how much of your income to spend and save. It loosely means that 50% of your income should go to your needs, 20% to savings, and 30% to your wants.
- The envelope method – as the name suggests, with this strategy, you keep cold-hard cash in different envelopes for each budget category. It’s great if you are a chronic over spender on things like takeaways or eating out, as physically seeing the money will make you think twice.
- Pay yourself first – this strategy works by prioritising savings. When money comes in, your first action is to set aside savings and ‘pay yourself.’ This works well if you have a large long-term goal, like purchasing a home or retiring.
- Conduct an insurance review
Most of us set and forget insurance policies, but with money flying out to cover our cars, pets, homes, health, life and more, regularly reviewing these can save you money and from being caught out too. If you’ve moved house, accumulated more stuff, gotten married, or started a family since you took out insurance, chances are you don’t have the cover you need.
Failing to review your insurance regularly can result in having too much or too little coverage. Too much cover means you’ll be overpaying for something you don’t need, while the latter could mean you’re not supported should you need access to insurance.
- Invest in your future
From term deposits to shares to property investment and managed funds, working towards having money invested is a positive step towards long-term financial stability. It’s essential for the investments you choose to fit with your financial goals and match your desired time frame and tolerance for risk. When done well, investments can provide additional income and opportunities to grow your wealth over the long term. It’s essential to regularly review any investments and adapt to market changes when necessary. Not sure how to invest? Find out which are the right investments for you.
- Call on a professional
Perhaps the most valuable and important tip of them all is not to shy away from seeking expert advice. From accountants to financial advisers, mentors, mortgage brokers, and property experts, you’ll find they have something different to offer depending on your situation or goals. These industry professionals are not only well-versed in navigating the quirks of their respective sectors but are armed with up-to-date knowledge and the experience of being immersed in the industry daily. If you’re considering property investment, you’ll find a wealth of knowledge among your local First National Real Estate team. Often living within the community, they work in, you’ll benefit from local knowledge and a genuine desire to help you achieve your property goals.
- Don’t stop learning
In the words of the wise Albert Einstein, “Once you stop learning, you start dying.” This rings true when it comes to achieving financial success, as a constantly changing financial landscape provides businesses and individuals with new opportunities and threats. It pays to keep informed about financial regulations, global financial trends, political and economic shifts, and the impacts these can have. By consciously dedicating yourself to ongoing financial literacy, you’ll become more adaptable, increase your ability to identify and seize opportunities and be more well-placed to achieve your financial goals.
Financial success doesn’t happen by chance
Aside from relying on a big Lotto win, effective financial planning is a lifelong commitment. It requires regular review and adjustment to ensure it continues to align with your life as it evolves and a thorough understanding of your long-term financial goals.
If investment properties or purchasing your first home is part of your long-term financial plan, reach out to your local First National Real Estate agent for expert advice and the best in local knowledge. Remember, if your financial wellbeing is weighing you down, you can seek help at Beyond Blue.