At the beginning of every year we always have the best intentions when it comes to financial new years resolutions. We have every intention to keep them and get more serious about our finances. However, we often get lost in that we struggle to find practical solutions on how to do this and take control. We have a couple of ideas for you.
Looking at how you can cut on what you’re already spending and by committing to planning ahead, you can boost your savings in any given year.
Quick fixes: Where can you save straight away?
Similar to that garage full of clutter, a careful look at your monthly budget and spending habits may reveal a lot you are able to “throw out”. Look at where you can cut excessive spending on luxury items, or where you can save on unavoidable expenses.
For a start, check whether you may be able to lower your bank fees: Can you set up an account elsewhere for cheaper or can you switch to a simpler offering if you’re paying for features you don’t really use? You may even be able to negotiate better interest rates on your credit card(s) and home loan. Similarly, check with your insurer whether you may qualify for lower insurance premiums. As your car ages, for example, its market value falls and you may be able to negotiate a lower car insurance premium. (Be sure to maintain the cover you need, however!)
Also consider whether you may be able to save on your investment fees, as even a small percentage saving in annual investment fees could have a significant impact on your ultimate investment outcome.
Finally, look at how behavioural changes may lead to further savings. Consider using public transport once in a while to save on fuel and car maintenance costs, or make a conscious effort to save electricity. You could even clear out that garage and have a jumble sale!
Once you’ve re-evaluated your monthly budget and spending habits, it’s time to put a savings plan in place.
The best idea would be to create your own savings roadmap. Think about your savings goals, both shorter-term and long-term, and write these down. Then consider how long you have to reach these goals, and how much you realistically need to save to do so.
Remember that by starting to invest as early as you can, you can maximise the power of compounding. Compounding happens because investment returns are earned on your total investment balance – your initial investment amount and the returns you’ve already earned on this amount so far. This effectively means that your investment returns start generating their own returns, and your investment can grow faster.
A regular debit order into a unit trust investment will ensure that you save in a disciplined and structured manner. However, these investments still offer the flexibility for you to change or cease your monthly contributions without penalty should your personal circumstances unexpectedly change.
In addition to assessing and amending your investment portfolio, it’s a good idea to plan ahead for the large purchases you intend to make throughout the year. By identifying such items in advance and saving towards these over a reasonable timeframe, you won’t have to finance your purchases with debt.
Ask if you need advice
If you do not have the time or inclination to conduct a thorough financial analysis, or if you would feel more comfortable obtaining professional advice, consult your financial advisor for assistance.
A financial advisor can help you calculate how much you should be saving, given your future financial requirements, inflation expectations and the returns you may be able to generate. They can also advise on the suitability of different investment products and their associated tax and contractual implications. When constructing these investments, your financial advisor will be able to assist you in making appropriate asset allocation decisions and comparing unit trusts from different asset managers. And once your portfolio is in place, your advisor can provide ongoing monitoring and support to ensure that your investments remain suitably positioned and your savings plan stays on track.
By prioritise your investments and implementing sound spending habits, this may well be a resolution that sees you reaping the benefits in years to come. You can carry these strategies through to any year, the point is to start and then maintain the discipline.
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)