At the start of a new year, many of us make new year's resolutions - goals we want to achieve throughout the upcoming months. Getting a handle on money issues is usually near the top of many such lists.
The problem is that most people fail to keep their New Year’s resolutions.
Here’s what you can do to help you stick to your resolutions - to cut your expenses and increase your savings.
Start by understanding your spend
It can be difficult to keep track of how and where you’re spending money, especially due to cashless payments and credit cards.
Many online banking systems include tools to categorise debits and make a budget – take advantage of them. Alternatively, download an app that helps you track your personal expenses on the go, like ASIC’s TrackMySPEND.
Find savings in the essentials
Some costs can’t be avoided – but many everyday expenses might be able to be reduced. For example, you could:
Move-in with your parents/relatives, or move into a cheaper rental or share house (short-term discomfort can pay off in the long term).
Implement tactics like meal planning, making grocery lists, and buying in bulk to save money on food. Set aside a budget for eating out/take-away and stick to it.
Shop around to reduce your regular bills – you may get better value if you switch, or tell current providers you intend to switch. Look for discounts for taking out multiple policies with one insurer.
Use the car less: take public transport; carpool with colleagues; or try walking or riding. You’ll be amazed at how quickly it all adds up to savings.
Make sure you’re paying off debts or credit cards completely each month or as much as possible, to reduce or maybe even avoid the added expense of paying interest.
Reduce common overspending
If you spend excessively on things like buying clothes, going out or expensive hobbies, it may be unrealistic to cut the expense entirely. Set a weekly or monthly limit and reduce that limit over time.
A Galaxy survey (FOX SYNES DEBT SOLUTIONS, 2016)of more than 1000 Australians showed that 73 percent have a problem with overspending. In particular, people tend to go overboard Christmas rolls around.
To reduce gift expenses, be like Santa: make a list (and a budget). Buy only planned items within your allocated budget – then stop! Ask your family for support; it’s easier to put a cap on gift values if everyone else does too.
Another common way Aussies overspend is on holidays. (CBA, 2016)has shown that a third of holidaymakers spent more on their trip than planned. Do your research and set a daily budget.
Control the credit cards spending
How many credit cards do you have? Do you really need all the credit cards you have? Managing your spending habits is an important part of building good credit score. If you don’t need multiple credit cards, then consider getting rid of any surplus cards, and reduce your credit card limit to the absolute minimum you need.
If you have multiple credit cards then it may be harder for you to keep on top of your spending. Moreover, lenders do not just look at your credit card payments or your balance. What they will look at furthermore is your credit limit in addition to the actual credit card usage. It is because a credit card offers your immediate access to the funds up to the credit limit anytime. Your borrowing capacity may be impacted by the limit of your credit cards, even if you owe $0.
Costs that could be eliminated
Look for opportunities to eliminate costs. Cancel unused services. Update your internet or mobile plans if you’re always paying for excess data.
Ask yourself: are you really using that gym membership? Are you getting value from your subscriptions?
If you stop going to “hipster cafes” for the love of avocado toast and pricy barrister-made coffee, you might be able to purchase property sooner. Likewise, if you put a pause on upgrading your smartphone that you just love, you might be able to purchase property sooner.
Remember, every wasted dollar is money you could be spending on your own home.
Jenice Lee at Finance Star is MFAA approved finance broker and is not your average mortgage broker.
Contact us if you want to find out more about how we can help with your finance options.
FINANCE STAR Credit Representative Number 529071 is authorized under Australian Credit Licence Number 389328.
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.
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