Six new year's resolutions to revamp your finances this year
Most of us want to put 2020 firmly behind us and look to a better year ahead. Here are six easy new year resolutions to get your finances in order for a happier and more prosperous 2021.
After a year marred by natural disasters, a global pandemic and a recession, it's more important than ever to get our finances back under our control in the new year. But doing so doesn't have to be hard work!
These six achievable resolutions are a great - and easy - place to start:
1. Pay down debts
Who doesn't start every new year aiming to tackle their debts? But with interest rates now at record lows, 2021 offers a chance to do so like never before.
Loans, mortgages and, to a lesser extends, credit and store cards now have lower rates. If you maintain repayments above the bare minimum each month, you'll chip away at the principal debt much faster.
Also consider consolidating more expensive debts (that is, those with higher interest rates) into one with a lower rate, such as your mortgage. You'll pay less interest overall, plus it's easier to keep track of where your money is going.
2. Review your insurances
It's always good to review your insurances each year. Don't blindly pay that annual car, home or pet insurance renewal: shop around for a better deal and ask your insurer to match it, or switch.
Review other types of insurance: health, life and disability (TPD). If you don't already have them, look at getting cover, if you do, are you over or under-insured?
Much has changed regarding insurance so if you cancel a policy, you may not be able to get it back again. Be sure to get independent advice before making any drastic changes.
3. Check-in with your super
COVID has caused mayhem for people and businesses alike. What does this mean for your superannuation?
Some funds were left exposed by the pandemic; some property markets and company shares saw their values wiped out. Others maintained steady growth.
As such, consider whether you'd be better off switching providers, and look at how your money is invested. A few simple tweaks could make a big retirement difference.
4. Build your emergency fund
Your accountant, financial adviser and even your mum have been saying it for years: "put money aside for a rainy day".
As COVID and the bushfires have shown, things happen - even ones you never thought possible.
2021 is the time to start replenishing those funds you used to cover lost earnings or start building a buffer for the next crisis. 3 months' savings used to be the goal, but perhaps 6 months' is a safer buffer given the persisting uncertainties.
5. Revisit your spending and investment plan
With so much change, revisit your spending and investment plan. For instance, COVID lockdowns and remote working have seen many people rethink where they live. Some found they need more space. Some found they no longer need a big house with a big mortgage. Others found they no longer need to live in a big city at all.
Changed goals generally demand changes to your budget too, so ensure that you and your finances are working towards the same goals!
6. Check in with the family and take action
The new year is the time to take action so that you are in a better position by next Christmas. We often don't know what we don't know, so see a financial adviser or research. Consider what you need to do at different ages and stages of life, and what happens if you or your family get hit by a life event.