It’s a New Year and the festive season has left your bank account scant of savings, or worse, bloated with debt. So what do you do? Here’s our guide to getting on the right path to pay off debts, and start saving in 2013.
Find a reason to save
If you think of saving as less of a chore and more as goal-oriented achievement it suddenly takes on a whole new meaning, says financial adviser Deborah Kent, owner of Integra Financial Services.
“The first thing you should do is set a goal,” said Kent. “But never set a goal that’s too long. Set short-term goals so you can attack it in chunks – it’s more manageable that way.”
And have a bit of fun with it. If you’re saving for a car, for example, put a photo of the car where you can see it and make a visual track showing how close you are to your goal.
Watch your money grow
Tracking your savings with a spreadsheet can be a lot of fun, especially as you get closer to your savings goal. “The fun becomes ‘look at what I’ve done’ and experiencing the goal,” adds Kent.
Compare savings accounts to ensure you’re getting a competitve rate on your investment and use a savings calculator to help you see how fast you can achieve your goal. RateCity’s savings account calculator can be a great place to start.
Say goodbye to bad debts
For plenty of Australians, “getting out of debt” will be a New Year’s resolution for 2013.
Debt problems plague many Australians thanks to a range of factors including easy access to credit cards and tendency to spend more than we earn, according to Paul Clitheroe, chairman of the Australian Government Financial Literacy board.
“A key starting point in getting control of debt is to know exactly what you owe. You’d be surprised how many people don’t have a firm rein on their credit card balance or home loan,” he said.
Use a budget planner, such as federal government’s option on its MoneySmart website and see whether you can add a bit more to your credit card or mortgage repayments each month.
Don’t be complacent this year
It’s important to check that you’re getting a good deal on your debts. Using a comparison website such as RateCity can help you decide if you could save by switching to a cheaper credit card or home loan. Refinancing can lower your monthly repayments and using the savings to pay off your debt faster will see you save a bundle in overall interest charges.
Change the way you think about money
Finally, think about adopting a new mindset – one that moves away from the “have it all” approach, says Clitheroe.
“Saving up for the things you want, and aiming to pay with cash wherever possible forces us to think twice before making impulse buys. It also means you won’t add hidden interest charges to the cost of your purchases,” he said.