5 top tips to get you on track with good financial habits for 2021

Take control of your money and put your best financial foot forward this year

Yes, there’s always someone with more money than you (unless you’re Jeff Bezos, of course!).

When it comes to personal finances, it’s better to ditch the upward comparisons and take a reality check, starting with the basics.

And while many people like to make financial resolutions at the start of the year, in some ways March can be a better time to plan ahead.

With the frenetic first quarter out of the way you’re in a better position to take a clear-eyed look at your incomings, your outgoings and whatever’s standing in the way of building solid habits to help you reach your financial goals.

Let’s start with No 1 – which is the foundation of all financial health – namely:

1. Do the sums and live within your means

This one’s a no-brainer because it’s obvious that if you consistently outspend what you earn, you’ll fall further and further behind financially.

Whether you have a monthly salary or earn money from a variety of sources, it’s important to keep your income figure firmly in mind and learn to spend below that amount so you can regularly put some savings aside.

Holding back on spending by as little as a couple of hundred dollars per month (and investing it wisely) will improve your financial situation dramatically over time.

2. Get cracking on tracking your spending

OK, so you’re no Jeff Bezos. Or Elon Musk. Or Bill Gates! But what if you’re earning decent enough money and still feel like you’re living from one month to the next?

Not having a sense of where money is actually being spent is a major reason people come undone financially and feel like they can’t ever get ahead.

Expense tracking is a financial habit you absolutely have to get on board with if you want to take control of your finances. It’s the best way to identify where you can cut back, reorganise your spending and regain control. Do you really need a third or fourth TV streaming subscription? Maybe not.

Whatever method you use – whether it’s a good old fashioned spreadsheet or a fancy app – it’s advisable to get tracking asap!

3. Tame your debt and limit the credit craziness

Paying as much as possible off the mortgage is often seen as the holy grail of debt management. It’s a great goal for sure but looking at the big picture is key. Your mortgage interest rate is likely to be low when viewed against your credit card rate, for example, in which case you might want to think about where’s best to make extra payments.

And when it comes to paying down higher interest debts, such as credit cards, it’s also worth considering consolidating them into a lower interest loan.

If you feel debt control is doing your head in, don’t be afraid to ask your lender or credit card company for help. They’re often willing to make adjustments, especially in the current economic climate where extra COVID support measures may be in place.

And, of course, not all debt is bad. You can also use it strategically to build wealth, especially while interest rates are at historic lows.

4. Think outside the (financial) square

Thinking beyond the basics is also important when it comes to getting a grip on your finances and boosting your bank account.

It’s clearly essential to not outspend your earnings, to track expenses, pay off debt and limit your credit card spend. But what about some less obvious things like consolidating your accounts and getting on top of that unclaimed super?

Or you could start a side hustle to earn extra cash, consider becoming a one car household or just simply pay your bills ahead of time instead of always being a bit late and risking interest charges.

Borrow or buy a good book on personal finance or think about seeing an expert like the team at EQ Wealth (they’re just upstairs at Kiaora Place) to help guide you along the path.

5. Get specific and set goals for each stage of life

Financial goals are never fixed but change depending on your age, relationships, career and long term plans.

Whether you have one or more of the following in mind:

• buying a property

• starting a business

• saving for kids’ education or

• planning for holidays and retirement,

getting clear on your goals and breaking them down into steps will help make them a reality.

Finding a trusted adviser to help you tailor a plan can also be a great idea.

A quick (but important) note: this article is of a general nature only and should not be relied on or taken as a substitute for independent financial advice.