Date posted: 28/01/2021

Top new year’s financial resolutions: How to take control of your money in 2021

It’s hardly an understatement to say that most of us are more than happy to see the back of 2020.

It’s hardly an understatement to say that most of us are more than happy to see the back of 2020.

And while resolutions are usually reserved for drinking less, getting fit, quitting cigarettes, or changing jobs, they can also be a good reason to overhaul your personal finances.

Susan Franks, Senior Tax Advocate from Chartered Accountants Australian New Zealand (CA ANZ), says January can be a clean slate and the best time to set new financial goals and start healthy money habits.

“2020 is certainly up there when it comes to challenging years, particularly when it comes to money,” she said.

“Some people lost jobs, had hours cut or simply indulged in too much online shopping and have found themselves with a significant credit card debt, or amount owing to a “buy now, pay later” provider such as Afterpay.

“It’s a new year and getting back to being financially fit should be at the top of the to do list”.

Her top five tips for improving your personal finances and financial health in 2021 include:

Resolution #1 - Set goals and create a budget

“Set realistic goals, be specific and automate your savings!”

“That might be putting $50 away each pay or cutting up the credit card and paying $100 off your balance each pay.

“Budgeting is one of the most important financial habits you can create! It helps you understand what you are spending, work out where you can save and ensures you live within your means.”

Resolution #2 - Track what you spend

“If you don’t track your spending, you can’t get an accurate picture of your financial health, and there are plenty of handy apps that you can use to help understand where your money is going.

“Do this exercise over a month and the results will probably surprise you. You will work out what is wasteful spending.

“As a starting point, look at money that is being spent on subscriptions you aren’t using, how much UberEats you’ve ordered, or spending you might be able to do without.

Resolution #3 - Reduce debt

“According to Finder, the average Australian has $2,728 owing on their credit card, so it’s time to cut up that card and start paying down that debt.

“Start your focus on the smallest debts because little achievements keep you motivated, and the ones with the highest interest rates, as they are the ones that are hurting you most. 

“With record low interest rates it is also time to consider refinancing your debts so that they are consolidated and have a lower overall interest cost. 

“If you find yourself in serious financial difficulty, it might not be a bad idea to call the National Debt Helpline on 1800 007 007 and receive some free financial counselling.”

Resolution #4 - Create a savings plan for an emergency fund

“2020 has certainly taught us that a bit of cash set aside in a rainy-day account is handy when the unexpected occurs. 

“How many times have you received your pay, thought about putting money away, then said, ‘I’ll wait until the end of the pay cycle before I do?’ (Prediction – there is never any money left over). 

“There is only one way to do this – automate, automate, automate

“That means setting up an automatic transfer, straight into your savings account, so before you have a chance to think about what you can spend the money on, it’s been put away.

“To help with this, move your savings into a different account, where you can’t access the funds straight away (and hopefully one with a competitive interest rate). It also removes the temptation. As they say, out of sight, out of mind.

“At the end of the day something is better than nothing, so look at your budget and see how you can work toward accumulating around three months of income as an emergency fund. 

“You need to do what is workable but aspire to saving 10-15 per cent of your net income.”

Resolution #5 Become a little more financially literate

“Whether we like it or not, money is important and affects all areas of our life.”

“Financial literacy – like knowing the interest rates on your home loan or credit card, or where your super is and what the fees are, or how much tax you are paying – is important.

“Having some understanding of the system means you are empowered to make confident money decisions about your future”.

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