With the festive season behind us, your bank balance may be looking a little bleak. If your finances have been feeling the strain from the festive binge, here are some tips to get them back under control.
Set financial goals for the year ahead
The new year often inspires us to make a fresh start. When it comes to improving your financial situation, there’s no better time to start than at the beginning of a new year.
Are there specific goals you want to achieve – like take that much-desired trip, increase your retirement savings or buy a house? Then set a goal and start saving towards it. If your bank account allows you to set financial goals, you can allocate a portion of your savings towards these goals and set up automatic payment transfers.
Track your spending and keep to a budget
To free up additional money for savings, you need to look at what you’re spending. When you track your spending, you can start to identify areas of waste and cut unnecessary expenses. Download a budgeting app that can help you create and manage your budget. It’s much easier than trying to do it manually.
Improve your credit score
Do you know what your credit score is? It’s an important number to know. If you have a poor credit score, banks and financial institutions will be reluctant to grant you a loan. Find out what your credit score is and take steps to improve it if it’s low.
Start an emergency fund
“Saving for a rainy day” is not just a cliche. Many financial advisors preach about the importance of an emergency fund. Emergencies can strike at any time. This could be unexpected car repairs, unplanned veterinary bills, the loss of a job or – as some experienced in 2020 – being financially gutted by a global pandemic.
Don’t get caught with your financial pants down. Ideally, you should have enough money in your emergency fund to cover 3-6 months of expenses in the event of a loss or reduced income.
Get a handle on your debt – and consider a debt consolidation home loan
Debt is insidious. It creeps up on you, and once it’s there, it’s hard to get rid of. When tackling debt, you might want to use the snowball method – start with smaller debts first. Once a small debt is settled, you can redirect those payments towards bigger debt.
Another route is debt consolidation. Instead of juggling various loans, you might want to consolidate your debt and only make one payment. Debt consolidation home loans are a great way to do this. If the interest rate on the debt consolidation home loan is lower than many of your individual debts, you could even save some money in the process.
Refinance your home loan
Mortgages, unlike car loans, are considered ‘good debt’. Owning a home is an investment and offers more security than renting. But some mortgages come with interest rates that can increase your overall debt and monthly repayments.
Every few years, compare your home loan’s interest rate against other lenders’. If there is a lender that offers a lower rate for a comparable product, refinancing your home loan could save you thousands of dollars and shorten your home loan term.
If 2020 was a tough financial year for you, you can recover. By applying these principles, you can become more financially secure in 2021. However, always consult a professional when making big financial decisions, like refinancing your home loan or consolidating your debts, as these choices don’t suit every borrower’s circumstances.
