Take Responsibility for Your Finances This New Year

February 4, 2019 October 22nd, 2021

The commencement of a new year is a popular time to resolve to make our lives better. Unfortunately most New Year’s resolutions are doomed to fail. Why is this? We usually base our resolutions on what we believe others value – such as losing weight, being fit or saving more money. Unless you value the goal the likelihood of you achieving it is low. So why bother? This plan is for you, when you are ready to take control of your finances. You can start today or in 6 months when you have seriously thought about what it is you want to happen in regard to your financial life. Each day we will publish the next step.

Step One – Financial freedom

Make the decision; what is it you want to achieve? Identifying what it is that you value will assist you in implementing a plan that has a good chance of success. If you are in a relationship where finances are combined do this as a couple.

Is it paying down debt? Or saving for a car, holiday or house? Perhaps you want to focus on having enough money in retirement?  Whatever it is, own it, say it out loud and write it down.

Step Two – Where are you now?

Understanding where you are financially is important to attaining the goal. Know how much money you earn and how much you spend. The Money Smart website has an awesome budget planner, use it. When completing the budget planner – be honest, brutally. Look at what you are spending, try not to guesstimate, look at your bank statement or track your spending over a period of time to ensure accuracy. Write a list of all debts, how much you owe, applicable interest rate, current repayments and term of the loan.

Now consider, step one again – what do you want to achieve? What is stopping you? Do you need to revise your debt or your discretionary spending? If so you would first want to achieve control of the hurdle. If your debt is stopping you from achieving what you want, revise what it is you want to achieve in the short term to managing the debt with view to the bigger picture.

Step Three – Set the goal

You have identified what it is you want to achieve now it is time to set the GOAL. The goal should be SMART – specific, measurable, achievable, results oriented and time bound. Now write down the goal. Don’t write I want to be debt free; instead write I want to pay down my debts of $10,000 in 12 months to start saving for a holiday in Spain.  Don’t write I want to save more; instead make it quantifiable e.g. I want to save $10,000 to travel to Spain in 12 months. Now the goal is specific, it is measurable, if step 2 has be followed it should be achievable, it is results oriented and there is a time frame.

Now break it into bite sized chunks if the goal is $10,000 in 12 months, write I want to save $192.30 per week (if paid weekly) or $833.33 monthly  (if paid monthly).

Step Four – Take Action

Now you have the goal – take action. If you are looking to accelerate the repayment of debt – automate the repayments so you never see the money in your spending account. If you are looking to save automate your savings portion of your pay into a savings account with no card access. If you are looking to get a Will – pick up the phone make an appointment with a solicitor. If it is retirement savings – talk to a financial adviser about salary sacrifice and the likely balance of your super at retirement. Whatever the goal, take action that moves you towards the goal.

Step Five – Review your progress

For the best chance if success review your progress. You can do this using benchmarks for example if you started on 1st February, on the 1st March what should be achieved at this point in time. If you are not meeting the benchmark – ask why? Is the why controllable? If so take control. Stumbles along the way, does not signify failure – walking away from the plan does. When you stumble reset and move forward.

Ask yourself some questions;

  • Have I done what I promised myself I would do? If not why not.
  • Is the goal still meaningful?
  • Has my situation changed? Go through the steps again and reset.

Ways to motivate yourself to achieve the goals;

  • Create a Goals Board – put up pictures on a pin board or use a screensaver of what it is you are trying to achieve. If you are saving for a house choose a picture of your dream home, if it is travel a picture of where you would like to travel to.
  • When you are tempted to stray consider how much impact this will have on your goal e.g. will you need to wait an additional two months to achieve your goal – are you still tempted to ‘cheat’?

Step Six – Tick off your goals

Tick off your goals. What I mean by this reward yourself for making it. This can be as simple as saying out loud to yourself e.g. girl we are going to Spain because we sacrificed a little to gain a lot. Post a picture on social media e.g. this is the house I bought after saving for 5 years for the deposit.

Set some new goals as you tick off the achieved ones.

MBC Wealth moving you from where you are today to where you want to be.