4 Healthy Financial habits to Adopt

Christmas and the New Year are fast approaching, it is the time of the year when people will overspend and over commit. It can sometimes take the next 12 months to get your finances back on track (only to go through it all again next Christmas).

As a result, it is a great time of the year to start thinking about your goals for 2022, both financially and personally.

What needs to be put in place to achieve success next year?

Just as all marathons start with one step, achieving your financial goals is exactly the same – one step at a time. What seems like an insurmountable goal, can be achieved when you focus on just the first few steps. 

1. Paying off debts

Let’s have a look at what happened when we all bought our first home. Firstly, we save like crazy to at least pay down a deposit.  We then take out a mortgage for the balance over a 25-to-30-year period.  The bank informs us of the minimum repayment required, usually on a per month basis and we begin the process of repaying our debt.  At a minimum, we need to make the monthly repayment to ensure that the principal amount borrowed is repaid over term of the loan.  Add to this a massive amount of interest required to be repaid over the years to the bank.  That’s exactly how the banks want things to go, you take your time, and the banks get rich.

Now imagine if you changed your approach. If your goal was to get rid of the banks quicker, to get rid of those ugly mortgages that just seem to hang around year after year? Even paying a small additional amount of $20 off the mortgage each week will save you thousands over the long term.

Adopt the same attitude to your other financial goals – start with small contributions and you will be surprised how quickly you see your savings build; if you don’t think you have any spare cash to contribute to your goal, then review your expenses. Are there minimal unnecessary expenses you pay every day that aren’t required? Eliminate the unnecessary expenses that you pay mindlessly and channel those savings into your financial goals.

 2. Create an emergency Fund

Having an emergency fund is essential for everyone. Unexpected expenses can be a burden but can happen at any time. From when your appliances break, car troubles to an emergency vet visit.

An emergency fund is a safety net to ensure you dont dip into your planned finances or credit cards for the essentials such as rent, bills and mortgage. If you do not have one in hand, the chances of accumulating debt greatly increases. 

The general rule of an emergency fund, is that it should cover three to six months of living expenses. This is important if your household has only one income for on-going expenses. Everyone has different situations and would be ideal to calculate your 3 – 6 months expenses. 

This goal is scalable to any situation you might be in. It could start small with putting in 30% of your pay check to your emergency fund and can build up to 50% and beyond. This will make you Financially Sorted. This is a critical financial habit to build upon. The future you will be happy you did. 

 3. Living below your means

Are you guilty of buying a cup of coffee at your local café before work? Or ordering Uber Eats more than eating at home? This happens to all of us, the issue is to have these guilty pleasures not as often as we would like. You could be saving thousands of dollars by packing your own lunch to work. 

It is also great to calculate a budget on these expenses, so you have a limit on how much or how often you will be buying something that is more of a want that is a need and to be able to indulge without betraying your budget plan and feeling great to be on the right track. 

 4. Have a goal to strive for

Setting yourself financial goals gives you something to work towards. Without making goals, you wont be able to track your progress to know if you are making those healthy financial habits. An easy way to make a goal is to make them “SMART” (Smart, Measurable, Actionable, Realistic & Timely). 

Finding something you are looking to put money towards that helps out your finances (smart), it is also good to find out how much you can put in (measurable & action) It is always good to start with a small goal, and feel good when you meet it (realistic), having a time limit to reach the goal (timely).

This can snowball into bigger goals with longer time periods and bigger actions. This is much better than “paying off debt sooner”, as it gives you more details in how you will achieve these goals making an ongoing habits.

In a season of celebration (and spending) I encourage you to take the time to plan for a financially healthy and Happy New Year; and all it takes to achieve your financial goals is getting started and taking that first small step.

Need a hand achieving your financial goals for 2022? Get in touch and for future advice, keep it Financially Sorted