Is it time to aim for a new 'financial-you' this year?
09 February 2016
According to data from the financial comparison site finder.com.au, Australians are set to spend a whopping $397 million this year on credit card interest payments after blowing their Christmas budgets.
This begs the question, how do we get on top of this so that we can get the best out of 2017 financially? Here is a two-step plan to help you slim down your debts and achieve your financial goals this year.
Step 1: Address your relationship with money
We all have a different mindset when it comes to money, but this has the power to shape your financial future for better or worse.
As the old adage goes ‘knowledge is power’, so before putting pen to paper, first establish how you relate to money. Here are five common financial personality types to consider.
For the hoarder, money represents security – more so than any other personality type. The hoarder may stockpile cash neglecting spending money on themselves and their loved ones for the fear that it could disappear.
While your finances may be in order, it might be time to consider investing more into yourself. This doesn’t mean blowing your budget on a luxury car but perhaps striking a balance when it comes to spending and saving.
Does a pair of new shoes make your face light up? Do you blow your budget when buying presents for loved ones? Well then, you might be a ‘spender’.
The spender often ‘has to have’ the latest things and gets a sense of enjoyment and happiness from buying them. If you can see yourself in this personality type, you may be partial to occasionally buying things on credit.
Try cutting down on what you purchase this year and, as a sweetener, think of what you could do with these additional savings.
If the word ‘money’ makes you shudder or want to stick your head in the sand, you’re likely an avoider. Unfortunately, the avoider has a difficult relationship with money and might chose to ignore its existence. This is very dangerous behaviour when it comes to managing finances and could end up resulting in unpaid bills or debts.
The first step to breaking this behaviour, as an avoider, is to face up to your financial situation and any debts you may have. Given time, and the right attitude, every situation can turn around if you want it to.
The saver loves nothing more than scoring a good deal and, often, this has absolutely nothing to do with their financial position.
At worst, savers can be viewed as cheapskates but, at best, this personality type is resourceful and creative with their funds.
If you’re a saver, you’ve likely already got a plan in place and stick to it pretty religiously. In your case, it might be good to remember to be flexible and allow yourself the occasional indulgence. Alternatively, why not consider investing some of your hard earned cash.
The investor likely has many properties, is involved in several businesses and has an entrepreneurial spirit. This personality type takes calculated risks with the hope that they will pay-off.
If you’re an investor in a good position, and haven’t done so already, perhaps it’s time to invest in someone else. Maybe you could help a family member or a charity to give something back to the greater community.
Step 2: Putting a plan in place
By now you probably have a rough understanding of your attitudes towards money, so what’s next? Well, it’s time to put a plan in place to ensure you’ve achieved all your financial goals by 2018. Here are some steps to take.
Set realistic goals
If you’re thinking of upgrading from Ford to Ferrari by 2018, perhaps you need to set goals that are more aligned with your financial situation. Set bite sized targets that you know are achievable.
Hold yourself accountable
It’s easy to let things slide when you have to be self-motivated, but this won’t get you to where you want to be. Schedule a regular time to review your financial plan and, where necessary, make amendments.
Have a money-mentor
This could be a professional or just someone you know and trust. Ask this person to review your plan every six to twelve months and hold you accountable.
Don’t give up!
Even if it looks like you won’t achieve everything, don’t lose hope. By creating a plan, you’ve already taken the first and most difficult step. If you keep at it, in time you’ll reach your goals and be on track to set new ones. Your relationship with money is a life-long journey, so why not make it a positive one.
You now have all the tools you need to manage your debts and financial situation in 2017 – so what are you waiting for?