New financial year resolutions to boost your finances and save money
With July upon us, there’s no better time to revisit your finances. The new financial year bells are ringing - and that means another chance to sit down, rethink your money goals, and start afresh, whether that’s paying off debt or finally taking the plunge into getting your first credit card.
Don’t know where to begin? Kick off mid-2019 with these Mozo resolutions to help you manage, save and put money back into your pocket.
1. Build an emergency cash stash
One in three Australians admit they’re spending beyond their means and wouldn’t be able to come up with $500 for emergencies, according to Commonwealth Bank research.
But an emergency cash stash is essential - it can keep you afloat if you suddenly find yourself in an unpleasant situation, giving you the ability to leave a bad relationship, job or rental property without ever having to look back.
An emergency savings buffer can range anywhere from $7,164.90 in Perth to $10,073.61 in Sydney, according to Mozo calculations, but would vary depending on each person’s situation and costs of living. Ideally, though, it should cover your expenses for 3 months.
So set yourself a savings goal and use our savings goal calculator to check how long it’ll take you to achieve your goal with your current savings plan.
It’s also helpful to set up a dedicated high interest savings account for your emergency cash stash. That way, it won’t get muddled up with regular savings and you can remove any temptation of dipping into the fund.
2. Actually stick to your budget
We’ve all been there - we create a budget in hopes of building our savings, only to find ourselves hopelessly falling through by going on the occasional shopping spree or eating out three times as much as we should.
Start by checking if your budget is on track… or veering down windy roads it shouldn’t. There are plenty of ways to cut down expenses on your budget, whether it’s giving up on that gym membership you never use or switching out $4 takeaway coffee for homemade ones.
The trick to sticking to your budget is to keep it realistic. One strategy for dividing up your income is known as the ‘50/20/30’ rule:
- 50% goes into essential spending - rent, transport, utilities, paying off debt
- 20% goes into personal saving
- 30% for fun, which varies from month to month - eating out, shopping, hobbies, entertainment
3. Save more on the essentials
Giving up on your daily coffee habit is all good and fine, but if you’re especially keen to save money this financial year, it’s important to cast your net wider and look at the big picture. Expenses like energy bills and bad-value insurance can make a considerable dent in your funds if you’re not careful.
Unsure about how you can cut down on these expenses? Think about switching to a better value electricity plan, taking up cheaper home insurance and car insurance, and selecting a new low rate credit card (or just keep using debit!)
4. Prioritise and pay your debt
In Australia, the average credit card holder has a debt of $4,905 and is paying hundreds of dollars in interest every year.
And that debt will keep adding up - if you only make the minimum repayments every month, it’ll take you 31 years to pay off a $4,400 balance and cost you about $14,900 in interest, according to MoneySmart.
This new financial year offers a great opportunity to pay back debt on your own terms. Consider devising a debt strategy that prioritises your debts according to interest rates, starting with the biggest killers (usually credit cards).
It might also be worthwhile taking out a debt consolidation loan which puts all your debt together in one place. This would help you to save on interest rate and manage repayments without hassle, so you can get out of debt sooner.
5. Get an A+ credit score
Looking to apply for a personal loan this financial year but have a less than desirable credit history? There are a few ways you could lift your credit score to its A+ game.
Getting your hands on a copy of your credit report is the first step. In Australia, you can contact a number of credit reporting bodies to do this, with the main ones being Equifax, Experian and CheckYourCredit. Generally, you’re able to request a free copy of your report every 12 months.
Once you’ve gotten your hands on a credit report, comb through to check for errors or listings you can contest - this might include inaccurate information that banks or lenders may have recorded, or in extreme cases, identity theft where someone has taken out credit cards under your name.
Finally, nothing damages your credit score like outstanding debts and bills, so make sure to pay them off (on time!)
But if your credit history is a blank slate because you’re never borrowed money before, it can be hard to prove to lenders that you’re responsible with your finances. A way to start building your credit reputation this July onwards is to apply for a low rate, no annual fee credit card - then be punctual with making your monthly payments.
Sounds simple enough, right? For help on picking the right card for you, check out our credit card comparison page.
So what are you waiting for? It’s time to write out those new financial year resolutions and get started today!