Published on January 12th, 2018
Four financial resolutions to start 2018 off rightIf you’re anything like the rest of us, you’re looking forward to making this year Your Year. Perhaps you’re going to work off that Christmas feasting with daily exercise and healthy eating, but food isn’t the only area in which Christmas leads us to excess. Why not consider 2018 a new start for your finances as well?
Perhaps this is the year that you finally sell that less-than-perfect abode and find the home of your dreams, or invest in property for your family’s future. Whatever your goals, a solid set of resolutions can give you the foundation to make things happen.
Here are a few resolutions to get you off on the right foot in 2018.
1. Get debt freeIt’s easy to get into the habit of putting things on plastic, but less easy to break out of the cycle. Not only will getting debt free, free up income to spend on the things that are really important to you, it will make you a more attractive prospect for a lender should you want to take out finance for a new home or investment property.
Resolve to pay off the consumer debts you already have, and from now on, save up for the things you want. Decide on a reasonable amount for your ‘fun’ money and keep it in a separate bank account, or in cash, so that you can’t overspend. The self-discipline that comes with sensible financial habits can be learned like any other skill, so stick with it and soon you’ll see your savings accounts build.
2. Live on your incomeThis sounds simple, but it’s a stumbling block for many of us. If you’ve never sat down and constructed a detailed budget, you may not even know how much your monthly expenses really are. It’s easy to overlook or discount costs that only happen annually, like car registration, or to assume that your gas bill will be as low in winter as it is now in summer. Use a year’s worth of financial records to work out what you really spend, and be honest with yourself.
If your fixed costs outweigh your income, you’ll need to make some changes. Can you reduce some of your outgoings? Shopping around for a better mortgage rate or lower insurance premiums can help, and there are a number of ways to reduce utilities bills. Don’t forget the other side of the equation either: can you increase your income by negotiating a pay rise or taking on overtime?
3. Build an emergency fundAn emergency fund is, at its core, a savings account. The difference between this fund and other savings is that it’s never touched except in an emergency, and builds back up again if it is used. It acts as a cushion against those unforeseeable expenses like a medical emergency or unemployment. It’s also great discipline to learn to save for an emergency fund and not touch it. Make this one a resolution and you’ll find your ‘saving muscles’ grow so strong you’ll be able to reach the next financial goal far more easily.
4. Create a second income streamWhether you’re employed full time, part time or not at all, a second income stream will give you some extra security. How you go about that will depend on your particular circumstances. You may choose to pick up a couple of casual shifts somewhere on the weekends or start a home business on the side if time allows. A more powerful approach is to look for a passive income stream: that is, one that doesn’t require extra time from you to sustain.
An investment property, for example, will provide you with an income stream in the form of rent. Investment properties are often negatively geared – that is, they cost more to run than the rent covers – in the first few years, but as the rent rises with market conditions and the mortgage dwindles, they will start to realise a return.
Any kind of second income stream gives you a bit of security against the possibility of losing your job, and may even encourage you to take the leap into something new.
As with all New Years’ resolutions, these will stick better if you start small and stay motivated. Try picking one at a time, and when you have that one bedded down, go on to the next. That way you won’t be overwhelmed with a total lifestyle change and you’ll be more likely to keep at it.
Good luck, and here’s to a prosperous 2018 for all of us!