New year’s money resolutions are fairly common. After all, if you want to take control of your finances, what better motivation than the fresh start promised by a new calendar year? Whether you’re looking to save more, reduce debt or simply understand where your money is going, we spoke to registered accountant and Bank Australia customer Stephen Yiu to get some advice on where to start with your new year financial goals.
Step 0: Set your goals and treat yourself kindly
Before we get to Stephen’s excellent tips, let’s take a moment to acknowledge that rising cost of living has put pressure on a lot of households over recent years. With that in mind, setting small but meaningful financial goals can be a healthy way to approach making changes. Organising your record-keeping, updating personal details and getting clarity on your current position are all significant, can help reduce uncertainty, and don’t require finding major cuts in your budget first-up.
Step 1: Get to know your income and expenses
If you want to understand or change your financial situation, the first step is always the same. “It starts with knowing your ins and outs,” Stephen says. “For most people, your primary income source is your take-home salary, possibly supplemented by interest income or other sources.” Though if your employer offers a salary sacrifice option, Stephen suggests looking into using it to reduce your taxable income, or looking into things like novated car leases. “The real challenge lies in getting a handle on your outgoing expenses.”
Stephen suggests categorising your expenses into core (essential) and discretionary (non-essential) spending. Core expenses include rent or mortgage payments, utilities, groceries and insurance, while discretionary spending covers entertainment, dining out, and subscriptions.
To keep tabs on your spending habits, Stephen suggests using tools like traditional spreadsheets, budgeting apps or your banking app.
Step 2: Set up an annual budget
Setting up a clear budget can help keep your spending on track in the new year, and you can use whatever method works for you. While detailed tracking can be beneficial, it’s not necessary for everyone. A broad approach – estimating your core expenses, and allocating an amount to your savings and towards discretionary spending each month – can provide guidance without overwhelming you with the details.
“Setting up an annual budget gives you motivation and clarity from day one,” Stephen says. “You realise how much you can save if you stay disciplined, and you see it building up to meet your target”
Step 3: Review and adjust your spending regularly
Once you have a clear picture of where you are and where you want to be, review your expenses regularly – at least annually, but ideally quarterly.
Look for areas where you have redundant spending – like subscriptions and services (we’re looking at you, unused streaming platforms and gym memberships) – or find better deals on things like insurance or your mortgage. There are plenty of platforms out there that will let you compare prices, inclusions and what matters most to you. “I always think it’s worthwhile to get a quote somewhere else,” Stephen says. “Obviously to stay in touch with what the market offers, but it’s also good to know if new competitors have joined that align with your values and ethics.”
You can also be rewarded for your efforts to align your finances with your values. For example, Bank Australia’s Clean Energy Home Loan gives eligible customers a discount on their home loan for taking steps to make their dwellings more sustainable and energy efficient.
Step 4: Reframe how you think about your spending
Changing how you think about money can prevent you from wasting it. “Your income is actually based on the time that you put in at work,” Stephen says. “So think about your expenses from this point of view too. When you want to buy something, consider: is this worth two hours of my paid time? Five hours? This can help you be more disciplined.”
Step 5: Make your savings and essential spending work harder
If your aim is saving money in the new year, there are ways you can get more value from the essential money you must spend each month. “There are some apps or programs you can join that give you perks on the expenses you can’t avoid, like groceries,” Stephen says. “Plus, using credit cards wisely can help you optimise your cash flow so you can earn interest on your money before making a payment.”
Similarly, Stephen suggests being strategic with the money you put aside. “Identify a good savings account that will generate interest for you,” he says. “Then even when the money is sitting there idle, it’s generating extra returns.”
Step 6: Make tax time a breeze
Although tax time only happens once a year, keeping it top of mind year-round can save you a headache when July 1 rolls around. “Familiarise yourself with what you can claim, depending on your occupation,” Stephen says. “I create a digital tax folder and just drag all of my e-receipts into there, but you can also take photos of physical receipts. It makes it so much easier to organise claims come tax time.”
Regardless of your money resolutions for the new year, Stephen says the key to getting in control of your finances is awareness, planning and a little bit of discipline. It’s not about denying yourself but about prioritising what’s important to you, and making steady progress over time.
“Sorting out your finances or setting up a new year’s saving plan is a bit like working out,” Stephen says. “You won’t see the difference on day one, but your progress becomes more visible and your new habits become easier over time.”
Finally, from us: celebrate all wins and positive steps. Getting started and coming back to your list of goals and priorities over time are all significant achievements to acknowledge.
Note: This article does not constitute financial advice, and is intended to be general only in nature. For specific advice for your individual circumstances, speak to a qualified financial advisor.
