As we near 2024 and look toward fresh goals (New Year’s resolutions, anyone?), it’s time to take stock of the year that was – what went well, what didn’t, and where to next.
In this blog, NZHL Auckland City Business Owner Hedy Sheck shares her thoughts on financially preparing for the year ahead.
Read on to find out more.
Taking Stock – what can you learn from 2023?
Reviewing your finances can be overwhelming, so it’s a great idea to have someone independent (such as your Mortgage Mentor or financial adviser) look over your finances and give you an objective view of your income relative to your spending and overall financial health.
But most importantly – DON’T PANIC – finances can seem worse than they are, and you can always take steps to improve your financial health. It’s about being realistic with your finances and setting a plan to improve, regardless of where you are now.
Here are a few questions to get you started:
- Where did you spend to budget, underspend, and yes, where did you overspend?
- Were the areas you overspent in a once-off, a whim, or are they a necessary ongoing expense?
For ongoing expenses, it’s about finding a way to include it in your budget.
Setting Goals
What are you saving towards, and why? Now is the perfect time to consider your goals and set a plan to get there.
Knowing the why behind your goal will help motivate you as you know you are building towards something of meaning.
I encourage my clients to think of their financial goals as SMART (Specific, Measurable, Achievable, Realistic, Timely) goals.
Specific goals are more likely to be relevant to you and your plans – if your goal is to buy a new car, ask yourself:
- What model?
- New or used?
- Any must-have features or specifications?
- When are you driving off in this new car?
Remember, to help set yourself up for success, it is important to ensure your goals are realistic and relevant. Not sure what is achievable? Ask for help – expert advice can go a long way when determining next steps.
Planning Ahead
At review time, we often notice that clients have taken on additional debt (such as personal loans) to achieve their goals which often have higher interest costs than utilising your mortgage.
If you have something you want to achieve this year, talk to us!
Even if it doesn’t seem achievable right now – we can show you the impact on your longer-term goals and help you set a plan to get there – plus NZHL clients have DebtNav, our unique online monitoring and debt management tool to monitor your progress.
Emergency funds are less fun to think about but are an absolute necessity to cover unexpected expenses.
When considering the best way to ringfence an emergency fund, it’s best to get advice from your Mortgage Mentor – they know your situation and what will work best with your budget and your home loan structure.
Setting up an automatic payment that goes straight into your savings account is a great start – it can be small, like 5%, which builds up and forms good habits. and if you are saving a percentage of your income – make sure you keep that percentage if your income increases.
Tackling Yearly Finances
Break your budget into chunks – start by adding your recurring costs and the essentials before building it out. Make sure you make it detailed and reference it against a bank statement, so you don’t forget anything – and be sure to think of the long term too.
For example, insurance can seem like a throwaway as you are not always claiming but it is money spent on protecting you, your loved ones, and your financial well-being if the unexpected happens – essential in my opinion.
If you are concerned about the cost of your insurance, get advice – there are ways to ensure you are protected within your budget.
If your budget is in the red, don’t panic; your Mortgage Mentor will help you work through areas where you can reduce costs or explore opportunities to use your money better.
Keeping on Track
You know what you can spend each month, but how do you stick to it?
Review, review, review.
Rather than waiting until next year, review your budget every couple of months to see how you are tracking – if you know you have overspent one month, you will know you need to tighten your budget the next.
If you continue to overspend in the same area, consider whether this is an essential or priority item that you have underestimated and if you need to adjust your budget.
For NZHL clients, DebtNav can help you monitor and update your plan as required, plus your Mortgage Mentor can jump in and look if you have a question.
Otherwise, you can use a spreadsheet, online budgeting tool, or even pen and paper to start your calculations – and remember don’t be afraid to ask for expert help.
Please note –Hedy Sheck is a Local Business Owner and Mortgage Mentor at NZHL Auckland City and has written this blog based on her experience. This blog is intended to be general in nature and should not replace personalised financial advice by your mortgage adviser.
