With just a few weeks left before you swap out your 2023 calendar, you’re likely thinking of areas where you can make positive changes in the upcoming year. Improving health and wealth generally tops the list of New Year’s resolutions. However, sticking to these resolutions throughout the year is challenging for many.
So, how can you set yourself up for success in 2024, especially regarding money? Considering the financial challenges of 2023, it’s prudent to assess your financial situation to protect against unexpected downturns. Here are three popular financial resolutions, reasons why people may falter, and steps you can take to succeed this year.
- Save money with a clear goal
When you decide to save money, setting a clear goal is important. Let’s say you’re thinking about buying a house in 2024. To make this happen, you need to know exactly how much money you’ll need for a deposit. Lenders typically require you to provide at least 20% of the purchase price upfront.
Considering the median house price (across all capital cities) of around $1,000,000, you’ll need to save at least $200,000 for a 20% deposit. Now, you can work backwards to determine how long it will take to save this amount.
Take a look at your spending, cut down on unnecessary stuff, and figure out a practical amount you can save each month. Knowing the exact amount to save and how long it will take can help you stay motivated on your saving journey. Another trick is to break down bigger goals into smaller, achievable parts. This will make the process more manageable and rewarding as you progress.
- Create a strict budget
While creating a household budget is a popular resolution, being overly strict with your budget is generally not a good idea. If you put too many restrictions on your spending and lifestyle, you may eventually feel frustrated and give up.
Consider a budget that accommodates your lifestyle and allows for occasional indulgences. For example, if you love dining out or watching movies at the theatre, allocate a reasonable amount for such activities. This way, your budget becomes a practical tool for financial management rather than a restrictive set of rules hindering your lifestyle. A balanced budget ensures that you can save for your goals and enjoy some of life’s pleasures along the way.
- Re without a clear strategy
When tackling your debts, having a clear strategy is just as crucial as making the resolution itself. If you’re struggling with multiple debts, having a plan to pay them off promptly can help enhance your financial well-being. Moreover, the interest you save by repaying loans can be used to build your savings. Clearing your debts can also strengthen your chances of qualifying for a home loan, bolstering your loan application.
If you’re juggling various debts and wondering where to start, a helpful strategy involves identifying and prioritising those with the highest interest rates. For instance, consider credit card debt, which typically carries higher interest rates than other loans. You can explore balance transfer cards that allow you to transfer your debt to a new card with 0% interest for a limited period. By focusing on repaying your loan in this period, you can save a significant amount on interest and get debt-free sooner.
Another effective debt repayment strategy focuses on paying off the largest loan first, known as the “debt snowball” method. Concentrating on paying off the debt with the highest balance initially can reduce your overall borrowing faster. There are other strategies as well you may choose to tackle your debt; the key is choosing one that aligns with your financial situation and preferences. What matters most is implementing a practical strategy that aids you in reaching your objective of becoming debt-free.