Four Tips to Fix Your Finances

by Carlisle Homes

If your financial record isn’t spotless, don’t despair.

Here are four tips on how you can come back from financial mishaps stronger than ever.

1. Reflect on mistakes

Very few financial mistakes are irreversible. What is important, though, is to understand how you got into your current financial situation. Honest self-reflection is vital to help you avoid making the same mistakes over.

You may already know that you’re prone to blowing the budget, but have you identified the why? We spend money for all sorts of reasons, including stress relief, the desire for status, because we find collections of objects soothing or a number of other reasons. If you know your triggers, you can start to put some barriers in the way and avoid the temptation in the future.

Perhaps that means cutting up your credit cards and working only in cash; with the number of ATMs dropping precipitously, this can be a very effective blocker! If you’re someone who spends without checking your balance, split out your discretionary money into a different bank account and keep an eye on it via your bank’s online app for quick visibility. Another alternative is to ‘pay yourself first’ by shifting money into savings and bill accounts on payday to limit what’s left to spend.

2. Face your fears

Do you know how much debt you’re really carrying? It can be hard to face up to your real financial situation, but it will give you some much-needed clarity. Sit down (with a glass of wine if you need it) and take a full reckoning of all your debts. This should include:

• Credit cards
• Consolidated or other bank loans
• Afterpay or Zippay balances
• Car leases
• Any ‘interest-free-period’ deals on white goods and other big purchases

 Write down the interest rate for each loan, including the interest rate on any ‘interest-free-period’ loans once that period has expired. This will help you make a plan of attack to pay them off. It’s good practice to put any extra money towards the highest interest rate first, because that’s the debt that will cost you the most if you only make minimum repayments.

3. Let automation do the dirty work

The less you have to handle your finances, the better, especially if you’re someone who finds it hard to practice financial discipline. Willpower acts like a muscle; if you have to exercise it too often, it gets tired, and you’ll slip. As with sticking to a diet and exercise regimen, you’ll find a financial diet easier if you don’t have to think about it too much.

Work out your actual expenses by going back over a years’ worth of financial statements. Once you have an accurate idea of how much you need to spend, set up an automatic transfer, scheduled for the day after you get paid, to move money across to a Bills account. From there, you can set up direct debits for all your major bills, leaving enough buffer for those unexpected expenses as and when they pop up.

Next, work out what’s left so you can set a realistic savings goal. Set up a second automatic transfer for this amount, ideally sending the money to a term deposit or savings account without a debit card attached. You can call it House Deposit or Overseas Holiday if that will keep you motivated!

This way, you’ll be limiting the amount of money available for impulse purchases and getting into good financial habits.

4. Find the fun

Lastly, budgeting doesn’t have to be all work and no play. There are several ways to add an element of fun to your budgeting goals. If you’re a keen shopper, try challenging yourself to find new bargains by shopping second-hand or diving into op shops. If you’re driven by data, many budgeting apps have visual graphics to help you see your net worth climb. Get creative in the kitchen with budget-friendly recipes; turn your hand to homemade gifts over shop-bought options - the list is endless!