Prioritise your budget health with these practices for financial success
Five habits for a wealth of financial health
Developing healthy financial habits is important at any age or life stage. The idea of being financially fit isn't necessarily about making more money, but instead forming a healthy relationship with your cash to empower you to make the most of your income and assets.
While it has been said that 'money can't buy happiness', the advantages of strategic spending and saving are well worth the effort.
The key is to establish a positive mindset and to develop practices and habits that allow you to feel confident and in control of your finances.
As we move into the second half of 2020, it's the ideal time to set some resolutions for the remainder of the year. If you're ready to prioritise your budget health, start by practising Resimac's five habits for financial success.
Controlling your debt and getting on top of debt repayments is the first step to achieving a healthy financial outlook, starting with debts with high interest rates and default fees.
Typically, credit cards, car loans and other small personal loans come with high interest fees. If you own a credit card, try and get into the habit of paying off any outstanding debts in full at the end of each month. Apps like Mint support you to stay on top of your loans with debt-tracking calculations; reminding you when you need to make your repayments.
For credit card and other debt accruing high interest fees, Money Hub recommends consolidating these into a personal loan with a reduced interest rate. If you have equity in your home, you could speak with your mortgage adviser or Lending Specialist about consolidating your debts into your home loan, simplifying everything into one repayment and taking advantage of lower home loan interest rates.
This way you can take control of these debts, rather than letting them take control of you! When it comes to repayments, make a point of paying as much as you can above the minimum repayments.
Set realistic goals
Thinking about what you want your future to look like will help to determine your financial goals. Perhaps you want to renovate your home, purchase a new car, or take a holiday? Maybe it is building a robust investment portfolio, saving for your child's schooling, or planning for retirement?
Whatever it is, saving becomes significantly easier once you've identified exactly what it is that you're working towards.
Establish your plan
Setting a budget, and actually following it, will help you to reach your goals and get ahead financially! And your budget does not have to be strict to be successful.
Review your daily, monthly, quarterly and yearly expenses, comparing them against your earnings and make adjustments to align with your goals. The purpose of a budget isn't to provide hinderance to the overall enjoyment of your life and the funds you have available, rather to create a guide for your spending.
As your salary, expenses and goals change, it is important to adjust your budget accordingly. New Zealand's trusted personal finance site, Sorted offers some straight-forward, easy-to-follow budgeting tips with the philosophy 'budget, don't fudge it!'. After establishing a budget that works for you, setting up automatic periodic transactions from your bank account on pay day will make the process of budgeting much more seamless.
Additionally, if saving is on your mind you may need to think beyond standard savings accounts. While low interest rates are good news for your home loan, they're not so great when it comes to your savings. If you want your dollars to grow further and are comfortable with a higher level of risk, it could be worth considering other investments such as shares, managed funds and property.
Create an emergency fund
Sometimes life doesn't go according to plan, and emergencies do happen. The last thing you need in a crisis is to be financially unprepared. To avoid the burden of worrying about how you will stay afloat financially if you lost your job, or had essential medical expenses, creating an emergency fund is a must.
A golden rule is to have a minimum of three months expenses (six months if you are self-employed) tucked away in the emergency account. Similarly, these funds should be preserved for real emergencies, never fashion or new gadget emergencies.
Work hard, hustle harder
Side hustles and passion projects are becoming an increasingly popular avenue of earning a little extra income. Founding a small business, turning your hobby into a money-making adventure, or even selling used or unwanted items can help you to earn a little extra cash and help you to reach your goals faster.
If you spend the extra income mindfully, it could allow you the flexibility to create the lifestyle you want while also paying off your debts and saving for your goals.
Developing healthy financial habits isn't just about checking your account balance and saving what's left of your pay cheque every month. Instead, transforming your relationship with money will help you to feel empowered by your wealth and the benefits of saving.
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Resimac. The above is general commentary only and is not advice tailored to any individual's financial situation. We recommend seeking advice from an insurance or finance professional before implementing changes relating to your finances.