Personal finances: There’s no time like the present to improve your financial health

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Another year has begun and many people will have made resolutions to make 2017 the year to get fit, stop smoking, work harder or take that overseas holiday.

But how many have decided to make 2017 the year to start getting their finances in great shape?

The pressures of 21st century living can be overwhelming as we wonder how we will ever get ahead.

However, if you’re prepared to be disciplined, there are some relatively simple things you can do to get into a position where you can start saving for the things you really want in life.

The reality for most of us in an environment where inflation is virtually zero and wages growth is pretty much non-existent is that, unless you win the lottery or receive a big inheritance, you won’t be earning much more at the end of the year than you do now.

The trick, therefore, will be to make better use of what you’ve got, and the first step to doing that will be to find out where your money is going.

For that you’ll need to do a budget. But don’t worry. If figures aren’t your thing, thanks to modern technology, a budget doesn’t have to be daunting.

The Australian Securities and Investments Commission has an excellent and very comprehensive budget planner on its Money Smart website.

Just plug in the numbers and it will do the rest.

One of the strengths of the Money Smart budget planner is that it quickly converts weekly spending into monthly or annual.

So, for example, those two coffees you buy every day, which cost $30 a week, add up to $1,440 over the course of a 48-week working year.

And that’s not to mention money spent on meals, clothes, visits to the hairdresser, entertainment, holidays and so on, which may not seem much at the time, but over the course of a year can be many thousands of dollars.

You may not want to change a thing, but doing a budget will tell you exactly what you’re spending and where.

If you need to spend less, your budget will allow you to see where it can be done.

But, make sure your budget includes ALL your outgoings. It might be worthwhile keeping a spending diary for a few months to ensure the numbers in your budget are accurate.

Include everything, right down to the last packet of Lifesavers.

Live within your means

The next point is obvious, but can be much harder, and that is to live within your means – i.e. stop using the credit card.

We all know that credit card debt must be repaid and that interest rates on credit cards are enormous.

It may mean going without for a few weeks or months while you save up and pay cash, but financially you’ll be much better off.

Getting rid of your credit card debt should be one of your highest priorities for 2017.

Easier said than done I hear you say, especially when the big bills start pouring in, such as car registration and insurance, house insurance, holidays, Christmas bills, etc.

This is where discipline and your budget come in.

If you have accurately put all those big expenditures into your budget you can work out how much you need to save throughout the year to cover them.

You can then put the money aside each week or month, but it may mean having to make some spending choices.

Other ways to save

A few other suggestions for improving your financial health in 2017:

  • Pay all your bills on time – don’t incur late fees as they all add up
  • If you’re a home buyer, make sure your financial institution is giving you the best deal on your mortgage rate (even if it means taking your business somewhere else)
  • Check your savings accounts. Are you paying unnecessary fees? Are you being paid a competitive interest rate? Would you be better off locking away some money in a term deposit?
  • Consider salary sacrificing into superannuation, you only pay 15 per cent tax on the money that goes into super
  • If you’re eligible and can afford it, put an extra $1,000 in after tax money into your super fund and the Government will give you $500 on top of that, and with the benefit of compounding over your working life that can add up to a lot of money for your retirement.

So how will you know if your 2017 financial fitness plan has been successful?

Humans are not companies where the only goal is to maximise profits. Qualitative factors including happiness and enjoyment play a big part.

But one thing is true for all of us – debts have to be repaid.

So if your debts at the end of 2017 are significantly less than they are now (unless you buy a house this year), and you are paying all your bills in cash and on time, you will probably have done well.

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