Why are Financial Resolutions Important?
Setting clear financial goals is integral to staying focused and making steady progress towards financial success. The beginning of the new year is the perfect time to take stock of your existing money situation and reflect on the steps you need to take for your future financial wellbeing.
“We cannot direct the wind, but we can adjust the sails.” dolly parton
With these words of wisdom in mind, here are our top ideas for ‘adjusting the sails’ on your financial catamaran, with actionable resolutions to consider as you cruise into 2023.
1. Set Clear and Actionable Financial Goals
2. Build an Emergency Fund
Why create an Emergency Fund, you ask? An Emergency Fund is your ticket out of any unexpected or sticky life situation and is absolutely key to being a boss when it comes to managing your personal affairs. While the specific number that will allow you to sleep well at night is individual, having 3 months of basic living expenses set aside in a high interest savings account is a common place to start.
US writer Paulette Perhach’s brilliant piece on the value of a F*** Off Fund should be essential reading for all women on why an Emergency Fund is essential to give you options should it become necessary to leave a job or relationship that doesn’t serve you.
3. Make a Budget and Stick to It
The aim of maintaining a budget is to work towards your money goals by having a clear idea of your income and expenditure. Create a budget, or review and update your existing one, by reflecting on your holistic financial goals and setting up spending categories that will support your aims.
When it comes to budgeting, it is important to remember that one size does not fit all. If you are new to the game, commit to experimenting with a few different styles to identify a budget system that will suit you best and help you stay the course. More experienced players can check in to ensure that their budgets reflect current goals and allow you to work sensibly towards meeting your key financial objectives this year.
4. Address Debt
There is no better feeling, financially speaking, than being foot loose and fancy free, unencumbered by the weight of monetary obligations to others. To this end, now is a good time to review the personal loans, credit cards and other debts you currently have on your books. Reducing or eliminating the amount of money you owe will put you well placed to handle unexpected life events and expenses in 2023.
5. Audit Your Expenditures
Undertake a financial review of your current financial commitments and consider whether there are areas where you can cut back. Areas of expenditure that are often ripe for action include cancelling subscriptions or memberships you no longer use, committing to buying groceries on special or in bulk, considering whether second-hand will do in place of new and shopping around to get better deals from energy, insurance, internet and phone service providers.
6. Keep Lifestyle Inflation in Check
Lifestyle inflation (also known as lifestyle creep) refers to the phenomenon of increased spending that generally coincides with additional money on hand following a pay rise or payment of a debt. While the incremental changes in spending habits (prettier dresses, fancier wine, nicer holidays) can be difficult to notice, lifestyle inflation can have a significant detrimental effect on achieving longer term financial goals.
Keep your impulses in check by staying aware of your spending decisions, and considering whether your intended purchases are consistent with your budget. Better yet, you can simplify your financial decision making process and avoid temptation altogether by committing, in advance, to automatic savings increases that accompany a pay rise or the elimination of a student loan or personal debt.
7. Level Up Your Super
There is nothing super about the retirement financial gap faced by women as a result of gender income inequality and the disruptive effects of taking time out to raise families. According to Women in Super, a not-for-profit organisation that works to improve women’s retirement outcomes, on average Australian women are retiring with 47% less superannuation than men.
While these structural and systemic barriers to financial security in retirement cannot be resolved at the individual level, they nevertheless highlight the importance of women keeping on top of their super contributions and investment strategies. Check in regularly to see how your super is tracking. Some actions to consider are to track down and consolidate super accounts, consider whether additional voluntary contributions make financial sense for you and review your super fund and investment options to make sure they are right for you given your age, comfort level with risk and expected age of retirement.
8. Improve Your Financial Literacy and Share Your Money Knowledge
Improving your financial literacy is the most important investment you can make in future you. Need some inspiration? Here are some books on money that provide a good starting point to diving in deeper and building your financial knowledge. Prefer to learn on the go? Subscribe to a finance or business podcast that tweaks your interest or make a point of regularly tuning in and listening to the financial news.
Remember that sharing is caring. With gender income disparity and other gendered challenges faced by women striving to get ahead financially, make 2023 a year to share your money expertise and the steps you are planning to take this year with the sisterhood. We can lift each other up by talking openly about money with like-minded women in our circle who are also interested in making positive changes as they work towards financial success.
Why Do Most Resolutions Fail (and What Steps Can You Take to Succeed)?
It is important to know that the main reason resolutions fail, whether financial or otherwise, is that the goal isn’t specific enough. Other common reasons for failure include having too many goals, having unrealistic objectives and not checking in on progress. Avoid these potential pitfalls and stay on an even keel by focusing on the following goal setting principles:
Be specific: Keep your resolutions clear by drilling down into the details. Aiming to save $500 per month is far more actionable than simply planning to “save more”. Breaking down larger goals into specific manageable steps is key to success.
Prioritise: Make sure you keep your resolutions focused and achievable by honing in on the most important steps you can take this year. Start by identifying the top 3 actions that are the most urgent and will make the biggest impact as you work towards your overarching financial goals.
Measure progress: Keep on track of how things are going by writing down your plans and scheduling regular financial check-ins to review your progress and tweak your goals as necessary.
Be flexible: Change comes about through planning and being open to revising goals as the year evolves. Strike a balance between a plan that is specific but sufficiently flexible to manage unexpected events (such as change of job or living arrangements). Remember that you can aways dust yourself off and start again if unexpected events arise.
Stay accountable: Strive towards success by sharing your resolutions with a like-minded friend who can help keep you accountable and cheer you on from the side-lines as you check off your goals.
Keeping these ideas front of mind when crafting your resolutions will help you stay focused and accountable into the new year, and on track to meet your financial goals.
This information is intended to be of a general nature only and should not be treated as specific investment advice on any particular matter. You should seek professional advice that takes into account your own personal circumstances before making any financial decisions.
