With only a few weeks until the start of 2020, now is probably a good time for you to decide upon one or more New Year financial goals that you feel is/are realistic and perfectly achievable. Whether you are in a strong place financially or are struggling, it would be great to put in place at least one such goal that you can maintain.
New Year Planning
The first thing that you will need to do is plan what you are going to do with your money. Obviously you will need to look at your budget taking into account your usual household expenditure such as rent, utilities, food and repayments on any liabilities that you may have such as a car loan. Having established what you have left from your pay, you can then consider what you would wish to use the available funds to help achieve your New Year’s financial goals.
You will need to consider whether you are looking to set up short, medium or long term financial goals or a combination i.e. saving for a holiday, paying off debts, saving for a deposit on a home or retirement. If you intend paying off liabilities, you will no doubt wish to pay off those on which you are paying the highest rate of interest first.
It is also important that you review your plan periodically to make sure that you are on track with your New Year’s financial goals.
So, let’s have a look at just some of the financial goals that you may wish to consider depending upon your individual circumstances.
Paying off your credit card
If you have a credit card with a balance outstanding on which you are paying a high rate of interest and are only able to make the minimum monthly repayment required then it would probably take you an awfully long time to clear the liability.
Instead, what you could do is arrange a balance transfer to another credit card provider that is offering a 0% interest rate for say 12 months and then arrange to reduce the credit card balance by a set amount each month to try to clear it over the 12 month period. Doing this will save you a considerable amount in interest payments and also help reduce or clear the liability more quickly.
Repaying your mortgage sooner
A long-term financial goal is to be able to repay your mortgage sooner than originally expected. If your lender permits it and it is financially viable, you could increase your monthly mortgage repayments to shorten the term. You may be pleasantly surprised at what a small increase in the monthly repayment can have in reducing the mortgage term so why not ask your lender for an illustration. Shortening the term also means that the total amount of interest you payback will be less than originally quoted.
Saving for a holiday
We all need a holiday to recharge our batteries preferably getting away with the family for a week or two.
So, how do you go about paying for a holiday? Well, a lot of people use their credit card and then pay it back over the coming months or some take on a loan and repay it over a 12-month period. On the face of it, that sounds fine but you will end up paying a lot of interest. A better option would be to start saving some money now on a regular basis i.e. weekly or monthly so that you have the funds available for your holiday in a few month’s time.
You can find out how much a holiday is going to cost and then work how much you will need to set aside on a regular basis to pay for it. There are many different providers of instant access savings accounts including some online providers so you could arrange to transfer a sum on payday from your everyday bank account into a savings account. You will earn interest on your savings and then, when you need to pay for your holiday, just transfer the monies from your savings account back into your everyday bank account.
Superannuation Contributions
There is probably going to come a time when you will want to give up work and enjoy your retirement. However, in order to do so, you will need to make sure that you will have enough money to live on. One of the ways of helping achieve this is to make superannuation contributions. This is a complex area of financial planning so you may want to get some professional advise about the option(s) available to you.
Obviously, the younger you are in planning for your retirement the better.
You can find some interesting information about super on the MoneySmart website.
Improve your credit rating
If you have got into financial difficulty resulting in you defaulting on your credit card this will have a negative impact on your credit score with the credit bureaus. This may have implications should you wish to borrow money for say a car as it is quite possible that you will be charged a higher rate of interest for a bad credit car loan. So, if you can improve your credit score over a period of time, perhaps by making sure that you pay more than the minimum monthly repayment on any new credit card and maintain your car loan repayments, should you apply for finance in the future, you may well be able to borrow the money at a more competitive rate of interest thus saving money.
Summary
Don’t delay – the sooner you start planning your New Year financial goals, the quicker you will have one or more in place and start reaping the rewards. Monitor the progress of these goals and be prepared to adjust them should the unforeseen occur such as an emergency car repair bill. Make 2020 the year that benefits your financial situation.