The end of the year is a damn expensive time. Between gifts and meals and holidays away (not that many of us had those this year) and the temptation of cyber sales, it can sometimes feel like you’re just throwing money out the window during the silly season.
Come January (here we are!) it’s not unusual for people to look at their bank balances and dry heave at the sight of what’s left. At least, that’s what’s happened to me this year (sorry, mum).
So, what do you do at that point? Shrug your shoulders and turn on Netflix? No. I chatted with Ray Jaramis, Head of Financial Wellness at Employment Hero, and Brodie Haupt, co-founder of WLTH over email to help figure out what the best move is.
Here are the biggest takeaways from those conversations.
Take a minute to break your finances down, first:
Your financial health can be an incredibly overwhelming topic to confront. If you have no idea where to start, Jaramis recommends sitting down and figuring out what you’d like to achieve in the next few years. “Having something clear to aim for can be critical to financial success,” he said.
From here, you want to set out smaller, more digestible goals for yourself.
“Planning for the next 12 months might seem even more overwhelming,” Jaramis said.
“But once you have your big annual goal, break it down into monthly goals and monthly targets. Small bite-size goals over time are a great way to digest big objectives.”
The key at this point, Haupt stressed, is to get a clear and honest picture of where you sit right now.
“The best place to start is by understanding your current financial position and the areas where you are happy, but also where you can improve,” he said.
Keep your goals realistic:
Sure, we’d all love to save half a million dollars in 6 months, but that’s not feasible for everyone. By choosing an arbitrary number without considering your spending habits and earnings gives you a rocky foundation, Haupt shared.
“By doing this, you will be setting yourself up to fail because you will lose motivation and get frustrated that you haven’t saved as much as you thought you would,” he said.
Look at extra cash as an investment opportunity:
If you managed to nab a sizeable bonus, or a pay rise, or even a hefty cash gift from a generous aunt at the end of the year, look at how that can be used to beef up your savings or investments, Jaramis said.
“In financial planning, I would see so many people get a pay rise and automatically adjust their spending accordingly. Get another pay rise, increase spending again. It is a horrible cycle to get stuck in. Rather than using your income as the guiding light to spending, the next time you get a pay rise direct it to savings or an investment for the future.”
Take advantage of finance tech:
Both Jaramis and Haupt explained to me that adopting certain tech options can be a simple way to boost your saving habits.
“There are a heap of round-up tools available in the market now. Lots of small, frequent amounts saved over time add up,” Jaramis shared.
He also suggested the age-old hack of removing your pay from your spending account and giving yourself an allowance.
“Psychologists call it ‘anchoring’ where essentially if you only see a smaller weekly amount available, you’ll likely spend less compared to seeing your total income as an available balance. Back in the day, we used to use envelopes to hack our brains,” he said.
Lastly, check out Moneysmart. Jaramis highlighted that they offer great budgeting tools that help with sorting out your finances.
In the end, reassessing your finances is a lengthy process that will take time and commitment but with some diligence and planning, there’s nothing to stop you totally shifting the health of bank account in 2021. Good luck!