Whether you want to purchase a house or get rid of your credit card debt, it’s not too late to start planning for a financially fit 2022 for yourself. Here are some tips to help you:
Three steps to set yourself up for financial success in the new year
With your finances, small changes can create a big impact. If you are thinking about what you’d like to achieve in 2022, here are three steps to help you achieve effective results.
1. Set a clear goal
If you aim at nothing, you’re not going to get anywhere. But if you want things to happen, write down and codify your financial goals.
A financial goal could be any plan you have for your money. For instance, you may want to pay off a credit card, make a down payment on a house, or even grow your emergency fund.
But simply thinking of a goal isn’t enough. You need to break it down into smaller milestones that will take you closer to the results you want to achieve. For example, if you want to buy a house this year, think of the following checklist:
- What is the price of the property you wish to purchase?
- How much can you borrow?
- How much should you save each month to reach your target savings goal for a deposit?
If you are confused about your borrowing capacity, connect with a mortgage broker to kickstart your home buying journey with confidence.
2. Review your financial position
It’s great to set financial goals for yourself, but they shouldn’t be unrealistic or lofty. It’s important to review your financial situation and check what you can realistically achieve in the set timeframe.
Going through your expenditures for the past year will tell you where you can cut down and how much you can save. But if you decide to be too stingy, you may give up too soon. A good tip to control your expenses could be listing your needs and wants and allocating more of your money towards your needs. However, each time you achieve a milestone, you can treat yourself with something you want.
It could also help to divide your goals into long term and short term goals, and calculate the exact amount you need to save across various time periods.
3. Monitor your performance
Each New Year it’s common to set a resolution you want to achieve. However, research has shown that 90% of people give up on their resolutions in less than three months.
But 2022 could be the year to break that cycle. Don’t wait until the end of the year to check how you are doing on your financial journey. Instead, set monthly or quarterly targets and review your performance regularly to ensure you meet your goals on time.
So, if you plan to save $10,000 this year for your home loan deposit, make it your target to save $2,500 every three months to stay accountable to your overall goal.
Savvy tips to crush your financial goals in 2022
Now that you have set your financial goals, here are some easy tips to help you achieve them:
1. Make a monthly budget and stick to it.
Making a budget can help you track your expenses and expedite your savings by cutting unnecessary costs. You can use any budgeting app on your smartphone or the budget tracker available on our website to jot down your spending on essentials and how you intend to use the rest of your money.
2. Shop around for better deals
Have you been holding up with the same bank or insurer for many years? Avoid paying the loyalty penalty by looking for better deals elsewhere.
Today, most people have uncovered the secret about service providers offering better rates to new customers. Therefore, it pays to frequently revisit your home loan, utility plans, and even insurance premiums to find out whether you could save some money by asking for a better deal or switching to a different provider altogether.
3. Tackle your debt strategically
If you aim to clear off your credit card debt this year, it could help to have a clear plan of action. There are generally two strategies for tackling debt. The first strategy requires you to pay off the debt with the highest interest rate first while making the minimum repayments on your other debts. The other option is paying off the smallest amount first, and so on.
You may even consider a balance transfer credit card to transfer your outstanding card balances to a new card with a 0% interest rate for up to 32 months. This can help you pay off your debt faster by saving money on interest charges, so that more of your repayments are applied towards reducing the principal. But if you are unable to pay off the balance within the introductory period, you could be hit by a high revert rate that could potentially worsen your situation.
One tip for a successful balance transfer is dividing your outstanding debt by the number of months in your introductory term. This will give you the amount you need to pay each month to be debt-free by the time your zero-interest period is over.
4. Boost your equity
Your equity refers to the value of your house minus the outstanding amount you owe on it. For example, if your home’s worth is $500,000 and you owe $300,000 on it, you have home equity worth $200,000.
Building equity in your home is helpful because it is a resource you can utilise to set up a new business, make the down payment on another house, or even pay for essential renovations. While appreciation in your property’s price will automatically boost your equity, you could make it your goal to increase the frequency of your home loan repayments, or pay a lump sum into your mortgage each year, to build equity faster and pay off your loan earlier than the specified term.
5. Declutter your life
Not only will it make your abode more spacious and clean, getting rid of unwanted items and the birthday gifts you are never going to use can also earn you some hard cash. Hold a garage sale or sell online to supplement your savings.
6. Make some lifestyle changes
Cooking your lunch every day instead of eating out can help you save money and improve your health, too. If you are living by yourself, getting a flatmate could fetch you some good company as well as reduce your household expenses. Or, how about cutting down on multiple OTT subscriptions and only sticking to one that you enjoy the most?
Here’s to a financially happy 2022
Planning now can give you much more financial freedom in the future. However, most new year resolutions or goals fail by the end of January. To ensure you don’t miss hitting your goals, it’s important to stay consistent and celebrate small wins to avoid burnout or feeling like it’s all too difficult. Also, don’t be too harsh on yourself. Even if you slip up occasionally, don’t give up. Just aim to get back on track as soon as possible.