You’ve got a new year, and you’ve got a new financial you! Here’s how you get off to a good start in 2022. For the most part, this last year was a mixed one, but a positive trend that came out of the pandemic was that it made us more mindful of our financial habits.
According to recent research, many Australians are welcoming the money lessons from 2021 and vowing to better their spending habits in the coming year.
Here are five quick and easy financial goals to aim for this year:
1. Make a monthly budget and stick to it.
It’s critical to know how much you spend each month by making a budget if you want to take control of your finances.
Calculate your fortnightly or monthly take-home pay first. Then make a list of all of your usual expenses, including house payments, bills, groceries, travel and gasoline, auto loan payments, subscriptions, insurance, gym memberships, and so on. Once you know how much you earn vs how much you spend, you can start figuring out where you might save money (such as having multiple TV streaming subscriptions).
2. Reduce non-essential spending
Examine your bank statements or download a spending tracker app if you truly want to know what you’re spending your money on. It may be shocking to learn that you spend $200 every two weeks on Uber Eats or that you’ve racked up hundreds of dollars in Afterpay debt by buying homewares and apparel online, but sometimes a rude awakening is just what you need to change your habits.
You can discover transactions flowing out of your bank account that you’re not even aware of if you track your spending, such as a subscription you signed up for but forgot about.
3. Pay off credit card debt
If you have credit card debt or other consumer debt, such as a personal loan or buy now, pay later debt, make it a priority to pay it off this year.
Make a list of all your current debts, including the amount you owe, who you owe it to, the interest rate you’re paying, and when it’s due.
Then you must devise a strategy for repaying that debt. Some people like to start with the smallest debt to give them a sense of accomplishment and keep them motivated to pay off the rest of their bills. Others opt to pay off the debt with the highest interest rate first, or consolidate their debt with a loan or balance transfer to get a lower interest rate.
4. Contribute to your mortgage to boost your equity
The difference between the property’s value and the amount you still owe on it is your home’s equity. Building equity in your home is crucial since it’s a resource you can utilise if you ever want to buy another home (this is known as a home equity loan). Once your property is sold, the equity in your home can be converted to cash, which you can use to buy a new car, finance a home remodel, invest, or fund a vacation. It can also be put towards a down payment on a new house or an investment property.
You can increase the frequency of your home loan instalments to enhance the amount of equity in your house. Consider moving to biweekly or weekly payments instead of monthly payments. If you can, make extra payments and apply lump sum payments like your tax refund to your mortgage (as tempting as it may be to spend it all on yourself!).
5. Refinance your mortgage to a lower interest rate.
If you had to sum up the economic pandemic effect in one word, it would be ‘unprecedented,’ not only because of the global pandemic, but also because home loan interest rates fell to historic lows. There has never been a better moment for borrowers to shop around and seek a better deal than now, with most house loan interest rates hovering around 2%.
Use our refinancing calculator to see how much you could save by switching to Homestar’s home loans!
Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.
