With 2023 well and truly upon us, it’s the perfect time to start afresh and prepare for the year ahead
Whether you’re feeling confident or cautious about your finances this year, there’s likely to be some room for improvement.
Here are 8 simple ways to help build your money muscles and set yourself up to be fighting fit in 2023.
1. Set your targets
Consider creating achievable targets, starting with a main money goal for the year.
For example, your main goal might be to save a certain amount, pay down more on your mortgage, and/or contribute a percentage of your income into super. Deciding on a main goal at the start of the year can help focus your attention on the actions that will support your longer-term goals.
It can also be helpful to have short-term targets. These are the ones you aim for throughout the year to keep you motivated. They could be anything from reducing your weekly grocery bill by $30, to getting a better deal on utilities.
2. Create your fitness plan
Every great athlete trains with purpose, so start out by mapping out your year ahead. If you anticipate new expenses in 2023 such as childcare, school fees, or an overseas trip, rather than waiting for them to appear on your statement, work out a plan now to cover the cost of them without getting off-track.
It can also help to look back on last year and review the ‘peak times’ when your expenses spiked. With a clear picture of when larger payments (such as car registration) occur, you’ll hopefully be ready for them.
Going through statements and creating spreadsheets can take a bit of time. Depending on the financial institution you are with, they may have a banking app that can do some of the heavy lifting for you, for example, by tracking and categorising your spending so that you can easily keep track of it going forward.
3. Start interval training
Research tells us that when we repeat behaviours frequently and consistently, they become habits1. Just like regular exercise, flexing those financial muscles regularly can help form long-term habits to help set you up for the future.
How often will you save and invest, further reduce debt, or add to super? Committing to regular intervals, with reminders that keep you on track, can be a good way to keep up the momentum throughout the year. For example, you might commit to saving, reducing your debt or adding to your super once a month. Or, you may decide to add to your investments once a quarter. Find what works for you and your finances, and set yourself up for success with regular reminders.
4. Enrol in budget bootcamp
Put your household budget through its paces to help make sure your finances are ready for what lies ahead. Depending on how recent your budget is, there’s a high chance that some of the numbers may be out of date, so consider taking some time to refresh them through a new lens. Doing the number-crunching now can help to ensure your budget is realistic and manageable for the year ahead.
And, if you don’t already have a budget, then now might be the time to put one in place.
5. Build your willpower
If one of your weaknesses is impulse buying, you’re not alone. According to PayPal2, 58% of us make impulse purchases because items are on sale, with 24% regretting it later. To avoid impulse buys, consider setting a seven-day rule where you wait a week before making the purchase. Doing this allows you the time to decide whether you really need it without getting swept away. Better still, if you’d rather avoid temptation altogether, unsubscribing from online sales and mailing lists could help keep your spending on course.
6. Boost your immunity
Consider strengthening your ability to deal with unplanned expenses by topping up your emergency fund. Start small if you have to, with spare change or money saved from cutting out unnecessary expenses. While your emergency fund needs to be accessible, keep it separate from your everyday funds, so you don’t risk digging into it until you really need to.
With rates on the rise, it’s also a good time to review any ‘bad’ debts you have, such as unpaid credit cards. While it might be hard to eliminate them immediately, consider working out a debt repayment strategy and exploring options for more favourable terms. This could help you save on interest, and help claw back a bit extra for that emergency fund.
7. Enlist your crew
Getting the family involved in household finances can help keep things on track, with the added bonus of teaching your kids some healthy financial habits for life.
Keeping an open dialogue about money, and asking family members to contribute their own ideas, can make everyone feel included in the ‘big’ decisions. If you don’t already, consider holding family ‘money meetings’, and make it fun by having a movie night or some other family activity afterwards. If everyone is committed to the same targets and has a say in how to achieve them, you may make better progress together.
8. Track and reward
Try to check in on your finances monthly to track your progress. It may help to put in place dates for ‘check-ins’ with your partner, or for family money meetings.
Also, consider rewarding yourself for making progress. It doesn’t need to be something expensive that undoes all your hard work, but it’s important to celebrate small wins. Research3 shows that it’s the smaller and more achievable wins that give us a sense of progress and keep us going in the longer term.
The home run
As with any new exercise regime, ease into it. Building financial muscles takes time, practice, and perseverance. So be kind to yourself, and keep it balanced.
Lastly, don‘t forget your personal trainer. Your financial adviser is there to help you keep score, stay on track, manage any hurdles, and make it across the finish line.
To talk with us about anything in this article, please get in touch. Contact Carrick Aland’s award-winning Wealth Planning team on 1300 466 998 or visit carrickaland.com.au/wealth-planning/.
This report is prepared by Bridges Financial Services Pty Limited ABN 60 003 474 977 AFSL 240837 (Bridges). Bridges is an ASX Market Participant and part of the IOOF group of companies. This report is prepared by the IOOF Research team for: Bridges Financial Services Pty Limited ABN 60 003 474 977 AFSL 240837, Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323, Elders Financial Planning ABN 48 007 997 186 AFSL 224645, Financial Services Partners ABN 15 089 512 587 AFSL 237 590, Millennium3 Financial Services Pty Ltd ABN 61 094 529 987 AFSL 244252, RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429, Shadforth Financial Group Ltd ABN 27 127 508 472 AFSL 318613 (‘Advice Licensees’). The Advice Licensees are part of the IOOF group comprising IOOF Holdings ABN 49 100 103 722 and its related bodies corporate (IOOF group). The Advice Licensees and/or their associated entities, directors and/or employees may have a material interest in, and may earn brokerage from, any securities or other financial products referred to in this document or may provide services to the company referred to in this report. The document is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of the Advice Licensees. The Advice Licensees and associated persons (including persons from whom information in this report is sourced) may do business or seek to do business with companies covered in its research reports. As a result, investors should be aware that the firms or other such persons may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision. The document is current as at the date of issue but may be superseded by future publications. You can confirm the currency of this document by checking the intranet site (links below). The information contained in this report is for the sole use of advisers and clients of AFSL entities authorised by the Advice Licensees. This report may be used on the express condition that you have obtained a copy of the Advice Licensees Financial Services Guide (FSG) from their respective website. Disclaimer: The information in this report is general advice only and does not take into account the financial circumstances, needs and objectives of any particular investor. Before acting on the advice contained in this document, you should assess your own circumstances or seek advice from a financial adviser. Where applicable, you should obtain and consider a copy of the Product Disclosure Statement, prospectus or other disclosure material relevant to the financial product before making a decision to acquire a financial product. It is important to note that investments may go up and down and past performance is not an indicator of future performance. The contents of this report should not be disclosed, in whole or in part, to any other party without the prior consent of the IOOF Research Team and Advice Licensees. To the extent permitted by the law, the IOOF Research team and Advice Licensees and their associated entities are not liable for any loss or damage arising from, or in relation to, the contents of this report. For information regarding any potential conflicts of interest and analyst holdings; IOOF Research Team’s coverage criteria, methodology and spread of ratings; and summary information about the qualifications and experience of the IOOF Research Team please visit https://www.ioof.com.au/adviser/investment_funds/ioof_advice_research_process.
Sources:
1 https://dornsife.usc.edu/assets/sites/545/docs/Wendy_Wood_Research_Articles/Habits/Neal.Wood.Quinn.2006_Habits_a_repeat_performance.pdf
2 https://www.paypalobjects.com/marketing/web/au/paypal-2021-ecommerce-trends.pdf
3 https://www.hbs.edu/faculty/Pages/item.aspx?num=40692
