3 Simple Things to Do This Year to Improve Your Finances

You don’t have to get an accounting degree or spend nights deep in spreadsheets to start taking control of your finances. There are simple steps you can take, starting right now, that can make a big difference to your financial health. If one of your resolutions this year is to improve your finances, here are three simple things to help you get started.

1. Focus on Small Incremental Steps 

Small incremental steps over big radical changes; that’s what works when it comes to improving your financial position. Being patient, persistent, and disciplined with your daily, weekly, or monthly financial habits compounds to huge improvements with time.  

To create incremental steps in your financial journey, break down your yearly financial goals into small habits or actions. 

Say you want to save $5,000 in your emergency fund this year. Break that down into monthly savings, so you know you need to save at least $417 per month to achieve your savings goal. You can break it down further into a weekly target of at least $97 ($5000/52 weeks) if that works better for your income frequency. 

Maybe you want to buy a new appliance or go on holiday by a specific date. Check how many months you have between now and then, and then calculate how much you need to put away each week or month. 

This incremental approach doesn’t just apply to savings; you can also use it to pay debt, increase your investment portfolio, or gradually increase your income. 

The same strategy works for long-term financial goals as well, such as superannuation planning, investment planning, and wealth-building. Start by defining your vision, and then, with the help of a financial planner, you can devise a plan for how to get there.  

2. Audit Your Spending 

An audit of your spending will reveal any unnecessary costs as well as small, unnoticed expenses that can quickly build up and suck up your income. An audit is key to helping you assess the best way to improve your finances.

There are two ways to do a personal spending audit.

The first option is to note down all your expenses for the next month, no matter how small they are, whether it’s rent, take-out dinner, or the transaction charges you pay to your bank.

Consider using a spending tracker app to make it easier to capture all your spending. At the end of one month, categorise and add up all expenses to get a clear picture of how much you spent and what you spent it on. 

The second option is to go through your bank statements, bills and receipts for the past month and pull out all expenses. Organise them into broad categories like transport, utilities and food, then add them all up.  

Once you have noted your expenses, take a careful look at them. Are there any unnoticed expenses, such as forgotten subscriptions? Is there anything you’re spending on that you don’t really need? Can you find cheaper alternatives for some of your expenses? 

Even as you make changes to control and improve your spending, keep tracking your expenses to see how much they change month to month. Hopefully, you’ll start to see some improvements in your finances, with more money getting freed up that you can put towards savings or investments.     

3. Allocate Your Resources   

You’ve set achievable financial targets and taken control of your spending. Great start! 

The next step is allocating your resources efficiently to help you achieve your goals. You can use the 50/30/20 rule as a starting point, though your ratio may vary depending on your specific needs and financial goals.  The 50/30/20 rule is a simple budgeting framework to prioritise your spending that divides your after-tax income into three categories: 50% for needs, 30% for wants, and 20% for savings. 

The goal is to plan your income so that you allocate the right amount of money for your needs and wants, short-term goals (e.g. emergency savings), and long-term goals (e.g. retirement). Budgeting will be a huge help, and so can talking to a financial planner to help you allocate your current finances in the smartest way possible. 

How Lifestyle-Led Wealth Can Help You Improve Your Financial Situation

If you’re looking to improve your finances, a financial planner can help you develop and execute a money management plan that improves your current financial situation and creates wealth for your future. 

At Lifestyle Led Wealth, we can help you plan for and improve your finances so that you can live the life you want now and progress towards your dreams. Whether you need investment advice, education funding, superannuation, or debt management, our financial planner, Justin, offers personalised one-on-one advice. 

Contact us at 03 9847 7516 to talk to Justin about improving your finances and securing your future. 

Disclaimer: The information contained in this document is of a general nature only and has been prepared without taking into account your objectives, financial situation or needs.