Top five tips for improving your financial health

Get a jump on the new year and start planning where you are headed financially.

If, like many at this time of year, you find yourself with no savings, a credit card debt and no idea where your money is going, then now is a great time to set some new financial goals and start taking care of your money habits health.

Don’t wait until after Christmas, either. The blow-out so many of us experience in December can have a lasting impact well into the new year. So take stock now to put yourself in a good place for the entire festive season.

The top five tips for improving your financial health

1. Set realistic goals and create a budget

Financial goals need to be big enough to get excited about, but small enough that you can actually achieve them.  That might be putting $50 away each pay or cutting up the credit card and paying $100 more off your balance each pay.

Split up your financial goals into short-term and long-term. Short-term goals are achievable within six months to a year, and long-term goals are anything longer than a year.

It may even help to rename your bank account with the name of your goal such as ‘Holiday’ to inspire you and ensure you think twice before taking money from it.

2. Track what you spend

If you don’t track your spending, you can’t get an accurate picture of your financial health. There are plenty of handy apps that you can use to help understand where your money is going.

Do this exercise over a month and the results will probably surprise you. You will work out what is wasteful spending.

As a starting point, look at money that is being spent on subscriptions you aren’t using, how much UberEats you’ve ordered, or spending you might be able to do without.

3. Reduce debt

According to Finder, the average Australian has around $3,000 owing on their credit card, so it’s time to cut up that card and start paying down that debt.

Focusing on the smallest debts can give you a sense of achievement and keep you motivated.

Also focusing on paying off the debt with the highest interest rate or transferring that debt to a lower interest may also help you achieve your financial goals more quickly.

4. Create a savings plan

How many times have you received your pay, thought about putting money away, then did nothing? There is only one way to do this – automate, automate, automate.

That means setting up an automatic transfer, straight into your savings account, so before you have a chance to think about what you can spend the money on, it’s been put away.

To help with this, move your savings into a different account, where you can’t access the funds straight away. It also removes the temptation. As they say, out of sight, out of mind.

If you can afford to and have a very long term savings goal or are saving for your first home, salary sacrificing and making extra superannuation contributions may be worth exploring.

At the end of the day something is better than nothing, so look at your budget and see what is workable, but aspire to save 10-15 per cent.

5. Become a little more financially literate

I don’t mean become an expert on the stock market kind of financial literacy. But you should know the interest rate on your home loan and credit card (if you have either).

You should also know when those large one-off expenses such as insurance and car registration are due so that you have set aside some money for them.

It also pays in every sense, if you learn a little more about your superannuation – what your fees are and tricks on how you can maximise your super – for example consolidating your superannuation accounts.

Information is power. Get the information, write your goals down, be accountable and stick with it.