8 ways to help build your money muscles in 2023
- Posted by Palladium Wealth Partners
- On January 12, 2023
- 0 Comments
With 2023 well and truly upon us, it’s the perfect time to start afresh and prepare for the year ahead. Whether you’re feeling confident or cautious about your finances this year, there’s likely to be some room for improvement.
Here are 8 simple ways to help build your money muscles and set yourself up to be fighting fit in 2023.
1. Set your targets
Consider creating achievable targets, starting with a main money goal for the year.
For example, your main goal might be to save a certain amount, pay down more on your mortgage, and/or contribute a percentage of your income into super. Deciding on a main goal at the start of the year can help focus your attention on the actions that will support your longer-term goals.
It can also be helpful to have short-term targets. These are ones you aim for throughout the year to keep you motivated. They could be anything from reducing your weekly grocery bill by $30, to getting a better deal on utilities.
2. Create your fitness plan
Every great athlete trains with purpose, so start out by mapping out your year ahead. If you anticipate new expenses in 2023 such as childcare, school fees, or an overseas trip, rather than waiting for them to appear on your statement, work out a plan now to cover the cost of them without getting off-track.
It can also help to look back on last year and review the ‘peak times’ when your expenses spiked. With a clear picture of when larger payments (such as car registration) occur, you’ll hopefully be ready for them.
Going through statements and creating spreadsheets can take a bit of time. Depending on the financial institution you are with, they may have a banking app that can do some of the heavy lifting for you, for example, by tracking and categorising your spending so that you can easily keep track of it going forward.
3. Start interval training
Research tells us that when we repeat behaviours frequently and consistently, they become habits1. Just like regular exercise, flexing those financial muscles regularly can help form long-term habits to help set you up for the future.
How often will you save and invest, further reduce debt, or add to super? Committing to regular intervals, with reminders that keep you on track, can be a good way to keep up the momentum throughout the year. For example, you might commit to saving, reducing your debt or adding to your super once a month. Or, you may decide to add to your investments once a quarter. Find what works for you and your finances, and set yourself up for success with regular reminders.
4. Enrol in budget bootcamp
Put your household budget through its paces to help make sure your finances are ready for what lies ahead. Depending on how recent your budget is, there’s a high chance that some of the numbers may be out of date, so consider taking some time to refresh them through a new lens. Doing the number-crunching now can help to ensure your budget is realistic and manageable for the year ahead.
And, if you don’t already have a budget, then now might be the time to put one in place.
5. Build your willpower
If one of your weaknesses is impulse buying, you’re not alone. According to PayPal2, 58% of us make impulse purchases because items are on sale, with 24% regretting it later. To avoid impulse buys, consider setting a seven-day rule where you wait a week before making the purchase. Doing this allows you the time to decide whether you really need it without getting swept away. Better still, if you’d rather avoid temptation altogether, unsubscribing from online sales and mailing lists could help keep your spending on course.
6. Boost your immunity
Consider strengthening your ability to deal with unplanned expenses by topping up your emergency fund. Start small if you have to, with spare change or money saved from cutting out unnecessary expenses. While your emergency fund needs to be accessible, keep it separate from your everyday funds, so you don’t risk digging into it until you really need to.
With rates on the rise, it’s also a good time to review any ‘bad’ debts you have, such as unpaid credit cards. While it might be hard to eliminate them immediately, consider working out a debt repayment strategy and exploring options for more favourable terms. This could help you save on interest, and help claw back a bit extra for that emergency fund.
7. Enlist your crew
Getting the family involved in household finances can help keep things on track, with the added bonus of teaching your kids some healthy financial habits for life.
Keeping an open dialogue about money, and asking family members to contribute their own ideas, can make everyone feel included in the ‘big’ decisions. If you don’t already, consider holding family ‘money meetings’, and make it fun by having a movie night or some other family activity afterwards. If everyone is committed to the same targets and has a say in how to achieve them, you may make better progress together.
8. Track and reward
Try to check in on your finances monthly to track your progress. It may help to put in place dates for ‘check-ins’ with your partner, or for family money meetings.
Also, consider rewarding yourself for making progress. It doesn’t need to be something expensive that undoes all your hard work, but it’s important to celebrate small wins. Research3 shows that it’s the smaller and more achievable wins that give us a sense of progress and keep us going in the longer term.
The home run
As with any new exercise regime, ease into it. Building financial muscles takes time, practice, and perseverance. So be kind to yourself, and keep it balanced.
Lastly, don‘t forget your personal trainer. Your financial adviser is there to help you keep score, stay on track, manage any hurdles, and make it across the finish line.
Sources:
1 https://dornsife.usc.edu/assets/sites/545/docs/Wendy_Wood_Research_Articles/Habits/Neal.Wood.Quinn.2006_Habits_a_repeat_performance.pdf
2 https://www.paypalobjects.com/marketing/web/au/paypal-2021-ecommerce-trends.pdf
3 https://www.hbs.edu/faculty/Pages/item.aspx?num=40692