New Year’s resolutions are hard to keep – especially vague ones to which you never properly commit! With two years of chaos that have thrown our finances into disarray, a common resolution for many this year is to get their finances back on track. Setting financial goals, or re-evaluating current ones, can help you keep on track to achieve yours. Finance tips and advice are everywhere, so it can be difficult to know what’s relevant or not.
To help set you up for success here are our top finance tips and tricks for 2022.
Reflect on 2021
Before you even think about finance tips for 2022, pause and take a moment to reflect on the year just gone. Have a look at your 2021 budget and analyse how you went in achieving last year’s goals. If you didn’t achieve these goals, take the time to analyse why and understand where you may have made a mistake. Mistakes aren’t a bad thing if you deal with them promptly and efficiently. Give yourself a couple of wins here to recognise that you can make positive change, and then turn around and say, ‘Now, what little steps can I take toward the bigger goals?”
The year ahead
While we can never be certain of what the future holds, there are specific trends our experts can review to forecast what the new year may bring. Inovayt Broker and Business Developer, Marty Vidakovic, has a few theories about what we can expect in 2022.
“Rates will rise. Fixed rates have already increased from 1.00 to 1.4 per cent in some cases, which means ultimately the variable rate will follow,” he says. “Because of this, it’s an opportune time to review your mortgage and overall financial position, to create financial stability and certainty for the next 2-3 years. Being proactive today could save you thousands tomorrow.”
Goal setting and strategy
When it comes to goal setting, many of us just have a vague idea of what we’d like to achieve. However, physically writing down your goal and putting it someplace you’ll see it regularly gives you more motivation to commit.
“A goal without a strategy of execution is just wishful thinking,” says Marty. “Sit down with a finance professional or an accountability partner to ensure your goal is realistic, as well as putting together a strategy as to how you’re going to achieve this goal.”
The strategy of execution can come in the shape of smaller goals to track your progress. For example, if your goal is to save $5,000 in a year, break this larger goal down to something that can be measured regularly. This could be achieved by committing to putting away $100 every week for that year and adding it as an automatic payment to a savings account. Tracking your goal allows you to get real-time updates on your progress. Seeing your goal come to life is also an important driver in keeping you motivated.
Marty says, “I recommend tracking goals weekly. You want your goal to be relevant and important on how it will impact your life personally or financially. Measuring and testing this goal regularly will help you see if you’re on track, or if you need to make any adjustments.”
If your goal for 2022 is investing or saving for a larger purchase, make sure that goal is realistic for your financial situation. Setting a goal to begin or grow your investments while you still have a large amount of debt may not be the most realistic option.
“Clients often ask me where best to invest while they still have high-interest debt,” Marty says. “Paying off or consolidating bad debt (personal loans, credit cards or car loans) is the best investment you can make. Paying these debts down is guaranteed to save you between 8 – 20 per cent.”
While paying off these debts with your after-tax income can be quite a costly task, “If you have the capability and equity, you can look to consolidate the bad debt into your mortgage at a much lower rate, or into one credit card with an interest-free period,” says Marty.
Review your loans
When was the last time you revisited your loans – specifically your home loan? You may be surprised, but the banks aren’t going to come knocking on your door with a better offer! The only way to know is to ask. Talk to your lender about refinancing your home loan. If possible, keep your loan-to-value ratio below 80 per cent, as this will put you in a stronger negotiating position.
Another way to review your loans is to consider whether any of your ‘bad’ debts (as mentioned above), can be consolidated into each other. Consolidating your debt essentially means you’re combining your current loans, so you’re only paying interest on one amount.
To learn more, head to our blog on how to consolidate debt.
Revisit your budget
How often do you sit down and review your budget? Your budget should be updated regularly to cover any new expenses as well as to track your spending. Consider your non-essential expenses such as gym subscriptions and streaming services: are you using them enough to get your money’s worth? If you find yourself constantly saying “I’ll go to the gym tomorrow instead,” or having multiple accounts with numerous streaming services, it may be time to reassess what’s necessary or not.
Marty’s advice when it comes to budgeting is, “Make a budget and see where you can make monthly decreases to your living costs. I guarantee you can. Put it the effort to create and stick to a budget and reallocate those funds into paying off the debt.”
To get your budget started for 2022, download our template today.
A tip from the expert
Marty has one more hint to add to these finance tips for 2022 as well as years to come.
“There is data that states that only 13 per cent of people can set, plan, action and ultimately achieve goals. Financial literacy is still a place where most people want to bury their heads in the sand and not take responsibility for their future. Seek the advice of professionals, plan, be self-accountable, put in the work and your future financially secure self will thank you later.”
2022 is already well underway, so it’s time to revisit, reassess and rewrite your financial goals for the year. Talking to a finance professional is the best way to set yourself up for success. For more finance tips in 2022 and beyond, get in touch with one of our team today or have a read of our other blogs.