The new year is a great time for a reset and resolutions.
Go to the gym more. Eat healthier. Spend less? Save more?
Maybe getting into good financial habits is one of your goals for the new year, or maybe it could be.
We all know that increasing costs are putting pressure on many New Zealand families, and that means it is increasingly important to have good money management habits and goals.
But just having the goal without any action behind it might feel a bit overwhelming.
While everyone’s New Year’s resolutions are personal, any time is a good time to get in good financial habits.
Whatever you want to do – whether that’s paying off debt or boosting your savings – the key things to do are to know what you spend, set clear financial goals, and work out how to achieve them.
Know what you spend
The first step towards getting into good financial habits is knowing what you spend and whether there are areas of discretionary spending that maybe you could cut back on. Are you living payday to payday, or do you have some money leftover?
It can be scary to figure out what your finances are – especially after Christmas time, which can result in an increase in outgoing expenses for many people.
Get to know what your expenditure is for a normal week or month – what do you spend your money on and where?
For most people the biggest expense is their rent or mortgage. But what is your second biggest? How much are you spending on TV subscriptions? Going for meals out? Food deliveries? Flat whites? Is there anything you could cut back on and what could that add up to over a full year?
Once you know what you spend, it is easier to figure out where you might be able to reasonably cut back, if that’s what your goal is.
Have a goal and work towards it
Setting a goal is the ultimate step in getting your finances under control. Make sure your goal is personal to you, and not something too overwhelming for the best chance of sticking to it. Set aside some money each week for “fun” so that you are balancing financial goals with enjoying living.
Your goal might be to get debt under control. Sometimes it is easy to get into debt, but it can be challenging to get out of it. You could consider consolidating your debt, and paying it off all in one place with just one interest rate. You might decide to ban yourself from using credit cards or buy now, pay later options. And don’t be afraid to ask for help if you want to get out of debt. The Co‑operative Bank’s Customer Advice team can provide non-judgemental help and personalised advice for what will work best for your situation.
If you struggle with budgeting, your goal could be to track your spending for a month – and watch for any spending leaks. Depending on what works best for you an app, a spreadsheet, or good old-fashioned pen and paper can help you track your spending.
Your goal might be to save more. You could consider opening a savings account you don’t touch and depositing a certain amount of money each week into this new account. Or it could involve cutting back – like bringing lunch into work rather than buying lunch every day. Or it could be a dollar amount – for example save $1,000 in the next 6 months, or put 5% of your pay aside every single month. The Co‑operative Bank has introduced a Hide Savings Account feature to its mobile app. Much like a piggy bank – the money you put in a hidden account will accumulate without you being tempted to dip into it.
For homeowners, your goal might be paying off your mortgage. The Co‑operative Bank’s specialist lenders can provide you with information about this. For example, if you have a monthly mortgage, you could change it to fortnightly repayments. Given there are 26 fortnights a year, the mortgage could be repaid slightly faster, saving you on a bit of interest in the current high-interest rate environment. On the other hand, if the mortgage repayments are proving tough right now, talk to your bank about whether you can refinance or reduce repayments to make it more manageable in the short term. No matter what your goal is, getting into better financial habits is an achievable goal – and the new year is a great time to start.