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It would be fair to say that financial goals typically make up some version of New Year's resolutions. Rather than setting a savings goal for 2022 or some over-ambitious target, consider improving your financial hygiene.
If you haven't heard this term before, it relates to your security and viability when it comes to money. Let's cover the areas that might need personal attention and other things you can set and forget for a more positive year with money.
Budgeting and the cost of living
If you have to look into how much you are spending each pay cycle and what that leaves you with at the end of the month, then you should delve into your budgeting and overall cost of living. Assess two to three months and see if you can spot habits and spends you no longer wish to support, or expenses that can be better funded. For example, you might see that your equipment and car demand a lot of your pay packet, so explore whether you can use asset finance online to take care of that specific spend.
Debt, loans and credit score
Acknowledging the debt and loans in your past, present and future will give you greater clarity over any patterns you might wish to work on. All debt is not made equal; home loans and student debt are "responsible debts" and have a small interest rate, whereas consumer debt is something you want to set about paying off immediately. Consumer debt will impact your credit score and it will anchor you to a period of limited growth and keep you from financial freedom.
Review your security
Are your accounts as secure as they should be? Most systems will prompt you to set up a multi-step verification, but you should also get into the habit of setting new passwords. You can do this bi-monthly and also go for security questions that are a bit more complex while you are at it. If you access mobile banking, and invest through an app, also ensure that your phone is locked with a secure passcode. Hackers are getting more sophisticated every year and so anything you can do to make things harder for a malicious hacker will be beneficial.
Are you paying for a subscription that no longer serves you? Many of us sign up for things and then forget to change or cancel our subscription, and these small yet incremental amounts can eat away at funds. Typically these subscriptions are app-based, and you can observe what subscriptions you are paying for by looking in the account settings on your smartphone. It's tempting to sign on to more things in the new year that promise us health, wealth and happiness - but review what you paid for in 2021 through subscriptions and whether you got the intended value.
Arguments could be made that the education system in Australia has not really prepared the average person to take on debt, invest in the ASX, or plan for financial freedom. Ultimately, the onus should be on us to educate ourselves on the areas of personal finance that will set up systems for success. There are short courses and podcasts that can be useful with this mission, but you may also be someone who learns by doing. Setting up a micro-investing account (like Raiz or Superhero) will allow you to see where your money goes and how ETF's are invested on your behalf.
It's a common misconception that you only seek a financial advisor when you're doing very well or very badly with your finances. The truth is a financial advisor can add a lot of value to any person's circumstances. They will have systems that can be implemented right away and tools to deliver the ultimate transparency on where your money is going. Setting financial goals is always a great step, but an advisor will work with you to set goals that are achievable and in line with your lifestyle.
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