The start of a new year is a great time to clean up your financial habits. Photo: TND
You might want 2021 to be the year in which you eat healthier, learn a new skill or land the job of your dreams.
But it’s also an opportunity to ditch your bad money habits.
One in five households relying on wages or a salary couldn’t raise $2000 within a week for an emergency, according to recent figures from the Australian Bureau of Statistics.
Financial planner Cameron Howlett said the global pandemic has highlighted that people often don’t financially prepare for the unexpected, like ill health or losing their job.
“People think that money will last forever and that’s not the case; when it’s gone, it’s gone.”
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The first step to get your money in order may sound obvious but most people don’t do it: Examine exactly how and where you spend your money over a year.
Most people underestimate their actual spending by 50 per cent, Mr Howlett said.
“People are spending much more than what they think,” he said.
Look over last year’s bank statements and work out how much you spent on categories like food, transport and entertainment.
Next, allocate each spending category a set annual amount and download one of the mobile phone apps that track spending, to help keep your purchases in check and work towards your savings target.
“The micro becomes the macro, as long as you keep at it,” Mr Howlett said.
He said having a meaningful end goal in mind, whether it be saving for a house, car, holiday or something else that is important to you, is the key to staying within your budget.
Going through your bank statements and drawing up a budget is a good place to start. Photo: TND