Each time we ring in the new year our goals are often focused on our health and wellbeing, but the start of a new year is also a fantastic time to get your finances in better shape. Whether you’re wondering how to save money in 2021 or you want to take control of your spending, here are some easy ways to get financially fit this year and set yourself up for success.
Take stock of your spending
With the excesses of the festive season still fresh in your mind, the new year is the perfect time to take stock of your spending habits. Taking some time to work out exactly where your hard earned money is being spent may be a little confronting, but it’s the best way to know where you could be making improvements to your spending. A good place to start is with a recent bank statement. Listing each transaction made over a month, a quarter or a longer period of time, bank statements can be used to identify what you are spending money on, from takeaway food, clothing and entertainment, to bills, rent and other essentials.
Making it easier to analyse your spending, some bank apps group purchases automatically, allowing you to see which categories make up the bulk of your spending.
Investigate different budgeting strategies
If you find it difficult to manage your money or are looking to streamline your spending in the new year, a budget can be a great help. Providing guidelines on what proportion of your income should be allocated into different expense groupings each month, from food and bills to entertainment and savings, many focus on the mindful use of your money. You’ll find that there are a wide variety of different budgeting strategies out there, meaning that if one doesn’t necessarily suit you, there are plenty more to try out.
One of the most popular strategies is the 50/30/20 budget. This budgeting tool divides your income into three basic categories: needs, wants and savings. Simple and easy to follow, it allows for plenty of ‘fun’ spending as well as ensuring you have the essentials covered. Although it may be a little more involved than the 50/30/20 budget, the Kakeibo budget is another great tool if you’re wanting to be more mindful of your spending.
Set some financial goals for the year ahead
It’s good to have some long term financial goals, such as saving enough money for a house deposit or paying off all your current debt, but sometimes it can be hard to stay on track when it feels like the completion of your goals is so far away. To help you stay motivated during the year ahead, it can be a good idea to set some short term goals. Over the next 12 months, you might want to save $5,000 for a holiday or pay off the entire balance of a credit card. The trick is to set goals that are specific, can be easily measured from month to month and have a deadline.
Make saving a habit
Whether you have a specific goal in mind or are simply looking to boost your bank balance, saving is a great habit to get into. Start the year off right by determining how much money you can realistically afford to save per pay cycle. If you aren’t in the habit of saving, you might want to consider starting off small and building up to a level that you’re comfortable with. Going all out in the first month could leave you short on money for bills and other essentials if you’re not careful.
Simple saving tips for 2021, such as giving up a few takeaway coffees each week or packing your lunch instead of buying food every day, may not seem like drastic changes in the short term, but you’ll find that every dollar counts over time. Shopping around for a better deal on your utilities, cancelling subscriptions or memberships that you no longer need or use are just a couple of other ways you can save some valuable dollars.
Consolidate your debts
If you’re paying off several personal loans or credit card balances at once, you may find it difficult to juggle your monthly repayments. Consolidating your debts into a single loan may help to make budgeting easier and could potentially save you money on interest and fees. Giving you just one payment to make each month and a single repayment date to remember, a debt consolidation loan could be an option to consider when getting your finances in order.
Build a rainy day fund
If 2020 has taught us anything, it’s that you can never really predict what will happen from week to week. Events beyond our control can leave us with fewer shifts or reduced working hours, or we may even find ourselves unexpectedly unemployed. To put yourself on the front foot for the year ahead, consider building a rainy day fund that’ll help you cover bills and other expenses when times are tough. If possible, you should aim to save anywhere between three and six months of average living expenses. This amount will vary from person to person, so it’s best to analyse your regular expenses, financial commitments and spending habits to work out how much you’ll need to set aside.