Get Ready For 2022

Get Ready

for 2022

Words Jacqueline Hodges

We have all been enjoying living and working in a somewhat unstructured way. We have all been working from home, tolerating and accepting change, and expecting the unexpected.

Some of us have suffered huge financial losses over the couple of years. Some readers will say we lost jobs, we lost investment value, we lost investment income. Others will say, well our credit card debt sky-rocketed, as we embraced an online spending spree. We took home loan repayment holidays only to be stung with a growing debt as interest still accrued. This unstructured way of living permeates our mindset and leaks into the way we manage our financial wellbeing. So while, we adjust to a new raft of COVID uncertainty, it’s time to close out the unstructured mentality and start 2022 with a healthy personal financial plan.

You may not have financial balance in mind or not know where to begin. So, following is the basic structure to step you through building your 2022 balanced personal financial wealth plan.

START A PERSONAL BUDGET

A personal budget is a summary of your income and expenses, that allows you to plan your saving, and your spending. Once you have created a budget, it becomes a useful tool to track your financial behaviours and help achieve your personal goals.

A budget also, allows you to manage your debt repayments and plan to reduce that debt. If you have funds available, it is good for the soul to set aside a part of the budget for donations.

1. GATHER YOUR DOCUMENTS

To start your personal budget, you will need to gather your financial documents, e.g.: • Bank statements • Credit card statements • Investment accounts • Payslips • Recent bills • Receipts from the last three months • Home loan statements • Car loan statement

Include all income you regularly receive and income from any other sources, such as child support or social security. Use your bank statements, receipts, payslips and any other information from the last three months to identify your income. • Wages • Investment Income • Child Support • Social Securities • Pensions Make a list of the income and record the amount you received. Total your income for each month.

2. CALCULATE YOUR INCOME 3. LIST YOUR SPENDING

Use your bank statements, receipts, and credit card statements from the last three months to identify your spending. • Mortgage payments or rent • Car payments • Insurance • Groceries • Utilities • Entertainment • Personal care • Eating out • Childcare • Transportation costs • Travel • Credit card payments • Savings • Emergency Funds • Private Health Insurance Make a list of the spending and record the amount you paid. Total your spending for each month.

4. TOTAL NET INCOME

Now subtract the total spending from total income and you will have an estimate of your net monthly income.

5. WARNING WILL ROBINSON!

WARNING: If your spending is more than your income, you will need to adjust your spending. Work through the list of spending. Look to see if there is anything that you can reduce, If there was an unusual one-off payment, such as paying for a new car in one payment or if you paid a large amount of your home loan, then these should be removed. If you still have thee debts, then allocate a reasonable monthly amount for that item.

START A SPENDING REDUCTION PLAN Make, 2022 the year to curb your desire for excessive or discretionary spending sprees. Focus on reducing your non-essential spending. Those lattes you are enjoying every day, may not seem much at the time, but cutting back on one coffee each day will save you around $1,000 per year. SET YOUR GOAL TO CURB THE SPENDING

Shopping can be so much fun but that feeling of instant gratification isn’t really helping you achieve financial freedom or growing your wealth. So next time you are ready to spend, think can I be doing something better with this money.

CONSIDER IF YOU REALLY NEED THOSE GORGEOUS SHOES AT THE MOMENT...

HERE ARE SOME TIPS TO START CURBING YOUR SPENDING: • Write a shopping list and only buy what is on the list • Buy one less coffee/tea/smoothie/juice every day • Cut down on the number of times your eat out or buy in • Think about what you need as opposed to what you want • Set a fixed amount each week for fun money • Commit to sticking to the plan

TIP: With the extra money that you didn’t spend, pop it into a separate savings account. Leave that account alone so you can monitor how much you really spend over the year. You’ll be surprised, once you have a spending reduction plan you will find yourself smiling as those small amounts grow and become money that you can use towards a bigger goal.

START A DEBT REDUCTION PLAN Make, 2022 the year to regain control of your personal finances. Focus on reducing your Debt. Right now, interest rates are still at an all-time low. At the time of writing, the Reserve Bank is still holding the interest rate at 0.10% and the banks rates are similarly low.

SET YOUR GOAL TO GET OUT OF DEBT

Getting out of debt is a personally rewarding and liberating feeling. Not only that, once you have paid off that debt, you will have more money to play with, to save, to give or to invest. FOLLOWING ARE OUR TIPS TO START REDUCING YOUR DEBT: • Set up a debt repayment plan • Switch credit cards to lower interest rate or 0% rate cards • Sell any unused items, check out local

Facebook groups and marketplace • Tighten your spending belt • Turn your hobby into a earning machine • Get a second job or start a side hustle • Commit to sticking to the plan

"COMMIT TO STICKING TO THE PLAN"

TIP: With the home loan interest rates so low, now is the time to pump extra cash into your loan to reduce the principal component.

You’ll be surprised, once you have a debt management plan you will find your stress levels and productivity at work or in your business will improve.

START A SAVING PLAN

You should set aside at least 10% of your income each month. Set up a separate bank account, so that you can see your savings grow. While, the interest rates, don’t seem to make savings worthwhile at present, at some stage interest rates will increase and you will have established a savings behaviour.

You need to know why you are saving and how much you want to save. Establish a savings goal, such as I want to save $10,000 to go on a holiday to the Great Barrier Reef or I want to save $100 from each pay to save for an emergency. Set up a separate savings account, so that you can watch your savings grow. If you are setting up an emergency fund, set up a separate bank account for this fund. If you don’t have a need for the extra savings, think about placing this into your superannuation fund instead. But remember, unless you have reached retirement age, or one of the conditions of release this money must remain in the superannuation fund.

SEE THESE USEFUL TIPS TO START YOUR SAVINGS PLAN: • Establish your savings goal • Set up a separate saving bank account • Reduce your discretionary spending • Look for a bank account that has no bank fees • Regularly review the interest rate payable. • If interest rates go up, switch to the higher interest earning account

You’ll be surprised, once you have a savings plan in place, you will find watching your savings grow will bring a smile to your face.

START AN INVESTMENT PLAN An investment plan allows you to grow your wealth through an investment portfolio and enjoy a diversified income stream. For example, if you buy shares, you may receive dividend income or if you invest in a managed fund you may receive a trust distribution.

Set aside an amount from each pay that will go towards your investment portfolio. Your investment portfolio may include, cash, property, shares, unit trusts, cryptocurrency, gold, and collectibles.

SEE THESE USEFUL TIPS TO START YOUR INVESTMENT PLAN: • Speak with a financial adviser • Learn about the stock market, the Australian

Stock Exchange has online training • Read investment books • Join an investment club, but check them out thoroughly • Understand your personal attitude to risk • Set up a savings account for your investment plan Investing can be risky, so we highly recommend that you speak with a financial adviser who, understands the type of investment that you are interested in. You wouldn’t go to a Toyota repairer of you own a Mercedes Benz. Likewise, if you want to invest in gold, speak with an adviser that specialises in gold.

You’ll be surprised, once you have an investment plan in place, while you will find the investment value may go up and down, you will learn more if you regularly record the changes in your investment’s value.

START A GIVING PLAN While, establishing a giving plan may not help with your personal financial wealth plan, you will enjoy extra credits to your moral bank account. Giving to a charity adds to your feelings of kindness and you will be helping an organisation achieve its charitable objectives and you could be supporting another human being.

Better still, if you gift to a tax deductible gift recipient, you may be entitled to a tax deduction for your donation.

You’ll be surprised, once you have a giving plan in place, you will feel your well of kindness and empathy grow.

SMARTER GOALS Goal setting is an important part of life and essential in developing your personal financial wealth plan. Goalsetting helps us align our desires and wants with an actionable plan and timeframe to achieve them.

This time of year, we all make resolutions, yet hardly any resolution survives part one month. Overcome this New Year’s Syndrome with SMARTER Goals. SMARTER is a mnemonic acronym. The New Year is a great time to reset your financial goals and revise your monthly budget. New Year’s resolutions come and go! Be honest with yourself! Be realistic! Make small goals that are more achievable that can be your stepping stones to achieving your larger goals. Be SMARTER.

If you would like our budget planner visit, www.wfomag.co/resources

S M A R T E R

SPECIFIC

MEASURABLE

ACHIEVABLE

RELEVANT

TIMED

EVALUATED

REWARDED/REVISITED/REVISED

Based on the original SMART goals concept, first known writings by George T. Doran (November 1981 issue of Management Review), later adapted by Peter Drucker.