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4 Tips to Kick-start Your Financial Life in 2015

by Shane McGrath

23 Jan - 2015 - 12:00 AM

Tags: planning-saving

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Each year, millions of Australians start the New Year resolved to get their finances in order.  Then, the motivation wears off and most people fall back into old habits and spending patterns, feeling stressed and overwhelmed.

Stick to your resolutions this year by focusing on small wins in your financial life and make little lifestyle changes that will last the long haul.

Here are four tips to kick-start your financial life in 2015:

1. Know where your money is going

There is no doubt that earning money is important, but the skill of controlling or managing that money is even far more important.

It is especially important for homeowners to manage their debts in a rational manner. Managing your debts wisely will save significant sums of money.

The word budget is sometimes feared as much as diet. Both can be hard to get started! But instead of thinking of budgeting as a restrictive kind of “money diet,” shift your perspective and remember that a budget is just a way to track money in and money out. Knowing where exactly do you spend your money is a sound financial strategy. Set a weekly money date to update your budget. Tracking your income and expenses weekly instead of monthly creates a healthy habit of knowing where you stand with your money. This bite-sized process makes it easier to stick with long-term.

2. Pay yourself first

There is no secret about paying yourself first by saving at least 10% of your income for your long-term benefit. The Richest Man in Babylon by George S. Clason, which is where this whole principle originates.

The whole book pretty much builds on this principle which (if applied accordingly) in the long run leads to financial freedom.

The Principle of saving 10 percent of your income / Paying yourself first works as follows:

You take 10 percent or a fixed amount (whichever one is greater) off the top of your net earnings every time you get paid. Even before you pay your bills and rent/mortgage you put away the “pay yourself first” money into a preferably high interest savings account and let it accumulate and gain compound interest.

This concept of “Guaranteed Wealth” has been around for a very long time, it’s simple and easy in concept but the main reason everyone isn’t rich from it is it requires discipline for a long time.

For example if you are twenty-five years old now and can start saving 10% of your salary and invest it achieving an average 10% return then assuming that you earn $30,000 and get no pay increases you will have $1,581,019 at age sixty five.

This is truly amazing stuff.

3. Set financial goals

Use numbers and dates, not just words, to describe what you want to accomplish with your money. How much debt do you want to pay off—and when? How much do you want saved, and by what date? It’s a method that has helped many couples pay down debt or save for a deposit.

Make bite-size money goals. One study showed that the farther away a goal seems, and the less sure we are about when it will happen, the more likely we are to give up. So in addition to focusing on big goals (say, buying a home), aim to also set smaller, short-term goals along the way that will reap quicker results—like saving some money each week in order to take a trip in six months.

4. Get Paid What You're Worth and Spend Less Than You Earn

It sounds simplistic, but many people struggle with this first basic rule. Make sure you know what your job is worth in the marketplace, by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company, for what you do. Being underpaid even a thousand dollars a year can have a significant cumulative effect over the course of your working life.

No matter how much or how little you're paid, you'll never get ahead if you spend more than you earn. Often it's easier to spend less than it is to earn more, and a little cost-cutting effort in a number of areas can result in big savings. It doesn't always have to involve making big sacrifices.

Wishing you all a fabulous and financially healthy 2015!

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