Want to manage your money better in 2013? Kick-start the new year with five simple resolutions to get your finances in shape.
1. “I will keep a spending diary”
Keeping a food diary helps dieters pin-point bad habits and trouble spots – and the same principle can be applied to money.
For two weeks, keep tabs on every cent you spend — cash, cheque, debit or credit card. If you spend it, jot it down. Having a record of your spending will highlight impulse purchases or wasteful splurges and help identify where you need to cut back.
Michelle Hutchison, spokesperson at financial comparison website RateCity.com.au, says keeping a spending diary is a great way to help you review your budget for the year ahead.
“A diary will show you exactly what you’re spending money on and if you need to adjust your budget for different expenses and for saving.”
2. “I will work towards a goal”
Set at least one long-term goal for 2013. Whether it’s simply being debt-free or saving $5000 towards your child’s tertiary education, goals are a great way to stay focused within a 12-month time-frame.
Try linking a savings account to your everyday transaction account, as an effective way of working towards a specific goal.
“Most savings accounts allow you to set up automatic savings plans where money from your transaction account will be automatically transferred to your savings account at set intervals of your choice, such as weekly or monthly”, says Hutchison.
3. “I will be organised!”
It may sound obvious, but simple measures such as keeping receipts, filing papers systematically, and using a calendar can reap significant rewards.
“Being organised will help you keep track of your expenses, minimising risk of missing bill payments and wasting money on hefty penalty fees,” Michelle says.
“Make a note in your calendar of when bills are due and when you get paid, and set up automatic debits from your transaction account to pay your bills on time. Pay bills at least a few days before they are due to allow for processing time.”
Using a calendar to keep track of when renewals are due for insurance policies or credit cards, for instance, is also a great way of reminding yourself to compare offers online, renegotiate or switch to a better deal.
4 . “I will take time to reassess”
For many of us, it’s hard enough finding time to visit a hairdresser let alone devoting hours to reading up on financial products. But according to experts, it’s well worth the effort.
“Take a look at your existing accounts’ rates and fees, but also their features and services. If you can’t find this information you can contact your provider or find the product disclosure statement online,” Hutchison suggests.
“You might be surprised to find you’re paying for a home loan with all the added extra services, like a 100 per cent offset account, but you’re just not using them.”
The same applies to credit cards. Although they may be offering great features, are they suited to your spending habits?
“Credit card offers vary significantly, so if you’re paying an annual fee for a high interest rewards card but spend less than $60,000 per year on the card, you’re probably wasting money. You could be better off with a low-rate, low-fee card instead.”
Try blocking out one hour a week for each of your accounts and policies.
5. “I will prepare for the unexpected”
No-one knows what life will bring in 2013, so be prepared for the worst by having a financial plan in place.
“A great strategy is to aim to save three months’ worth of expenses. If your household expenses total $4000 per month, you should save $12,000. If you can’t afford this, consider taking out an income protection insurance policy,” Michelle says.
Financial planners often advise hospital cover as a must-have – especially for those with larger families or big financial commitments. Medical bills can often cripple families who are not prepared for unforseen illnesses.
