WELLBEING

How to start 2021 without a financial hangover

21 December, 2020 . 0

A new year is an excellent time to get on the front foot with your finances. But success takes a little planning.

Here are seven tips to make sure you know where your money’s going in the year ahead.

Set a holiday budget

Summer is a great time to relax and enjoy the rewards of your hard work.

But financial adviser Cara Brett says it’s still a good idea to set a weekly budget.

“If you can stick to that holiday budget that will make your life easier because it means you can actually have fun and spend a little more than usual, but it’s not going to hurt you in the future,” says Cara, of Bounce Financial.

Go easy on the Ubers

After a very sedate 2020, you might be tempted to live it up a little – and why not?

But Cara says using taxi or rideshare services – or food delivery – excessively can be a huge “money suck”.

She suggests thinking about what will give you most enjoyment for your buck, rather than simply choosing convenience.

“If you could potentially catch yourself a train or a bus and save yourself $50, that could be used to eat out with someone,” she says.

Buy now, struggle later?

Cara says you should also be cautious when it comes to Afterpay, especially if buying multiple things at once.

“If it all hits and you physically don’t have the money there to pay it, all of a sudden your interest is ludicrous,” she says.

“Think of it the same as a credit card and apply the same rules … if you don’t have the money to pay for it, then probably don’t buy it.”

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Plan for back to school

Ideally, you should plan for back to school expenses by squirrelling away money throughout the year, says Cara.

If that hasn’t been possible, try to source textbooks yourself, preferably second-hand.

Don’t forget childcare and school fees

Over the summer break, some of your usual direct debits – at least for childcare – will likely be on hold.

But don’t forget that $200 or $300 a week expense will return, warns financial adviser Michael Miller, of Wealth Market.

Plan for bills to rise

Bills have a habit of going up, especially the large ones such as home insurance, rates and car insurance, says Michael.

“If I was putting away $300 a fortnight to cover that before, maybe I want to bump that up to $315 or $320 so I’ve got enough there when those renewals do come through,” Michael says.

Look back – and forward

If 2020 was a financial shocker, Michael recommends taking stock. For example, how much did you actually earn; what were your expenses?

He also suggests considering different scenarios that may occur in the new year, and preparing to make tough decisions if required.

“It will depend on the person and their circumstances,” he says.

“But some people might be in the position of, if 2021 is a repeat of 2020, actually that might force them to pursue a career with higher pay, or move to a lower cost place of living.”