The start of a new year for many is about setting goals and resolutions for the next 12 months and getting finances in better shape is more often than not part of the equation.
When it comes to finances, experts say the onset of the New Year is the perfect occasion to set aside some time to think about your financial priorities.
Financial advisor and ProSolution Private Client director Stuart Wemyss says while the prospect of sorting out your finances can seem like a big job, it essentially comes down to “trying to bite it off” in a logical and pragmatic approach.
“It's probably just like any changes in life, instead of trying to aim for perfection in one foul sweep, I think it's really just about breaking up into little bite sized bits and hoping for marginal improvements,” he advises.
“If I was in a situation where my finances were in disarray, and I felt like I didn't have much in the way of surplus cash flow, I just try and identify the top three things that I could do to improve that.”
For example, he says this could be getting a better job or retraining to earn a higher income, or if you have high credit card debt and the interest you are paying on it is really draining the cash flow, focus on just repaying that.
“A common complaint or observation that people have is ‘I seem to not have any surplus (cash), but I don't know where it's going, and I don't live an extravagant lifestyle’.
“The answer typically is that money is leaking on probably 100 different transactions each month, that aren’t adding to your standard of living – if you didn't spend money there, you wouldn't even notice it.
“A simple fix is to transfer a set amount each week, fortnight, or month into a separate ‘discretionary spending’ account.
“Then you can monitor your spending instantly — the account balance tells you everything you need to know.”
Analyse your transactions
New South Wales-based Mortgage Choice broker Kelly Carter says a good tip to tidy up your bank accounts is to download a good six months’ worth of statements and have a look at where your money is being spent.
Tidying up bank accounts is a useful new year 'to do'. Picture: Getty
By seeing where you could make changes and cuts to some areas of extra expenditure, you might consider building an emergency fund as part of your 2026 financial goals, she says.
“So have a think about the things that you want to achieve - that could be holidays or renovations, it could be putting some money aside for your kids schooling,” she says.
“Work out what needs to be done but think maybe a little bit longer term - maybe up to the next five years.”
Enlist an ‘accountability buddy’
Ms Carter says seek out an “accountability buddy” - a friend, your partner or your parents, or somebody you can check in with, who will keep your financial resolutions on track by holding you accountable.
Keep on track with an accountability buddy. Picture: Getty
“If we have somebody that's got our back, and we're talking about our money and having an open conversation about money around the dinner table in front of your kids, it is a great way of educating them and at the same time as keeping you accountable,” she says.
Analyse what you are paying for non-discretionary expenses
At least one a year, maybe even twice, Mr Wemyss advises having a look at what you are paying for utilities, insurances, as well as comparing your home loan interest rate to see if you are getting the best value for money.
“At the end of the day, whether you're paying 5.5% or 6.5 %, it's actually doesn't change…you don't get any more value from a bank or a mortgage provider,” he says.
“So it's the same with electricity - power is power? It really then just comes down to price, you don't need to think about functionality and so forth.”
Check your home loan interest rate
Loyalty to a lender is expensive, Mr Wemyss says.
“Regularly review your loan, check that the rate is still sharp, and restructure if needed,” he advises. “A small rate improvement compounded over decades can materially shorten the loan term.
“And if you did that every year, you’d be miles ahead the average Australian.”
Make extra mortgage repayments
If you are paying your mortgage on a monthly basis, Ms Carter suggests make extra repayments without thinking by looking at your monthly repayment and dividing it by four.
Maximise your position with extra mortgage repayments. Picture: Getty
“A lender will give you a minimum monthly repayment that's required, and if you divide that by four, you're effectively paying another month worth of repayments over a whole year,” she explains.
“But because you're paying it weekly and it’s just a little bit extra, you don't realise that it's already going out.
“So on a 30 year loan term, that could potentially take that down to 25 years, which is a large amount of interest that you don't have to pay back to the bank.”
Ms Carter says it is important to remember interest is calculated daily but charged monthly.
“If you can pay weekly or fortnightly into your home loan, you've got more money sitting in your home loan … so the more that you can put into your home loan early, the better,” she suggests.
Set a mortgage deadline
Ms Carter says if you have a specific goal, for example, to repay your home loan in 15 years use an online home loan repayment calculator, pop in your balance and your interest rate to work out what the repayment would be, and pay that.
“There's no magic wand to pay off your home loan faster, except just pay extra repayments,” she says.
Pay yourself
The simplest way to improve savings Mr Wemyss says is to “pay yourself first.”
Try the 'pay yourself first' approach. Picture: Getty
“Automate transfers to savings, or your offset account the moment income arrives. If the money never reaches your everyday account, you will not spend it,” he explains.
“Once you have a clear picture of what you can comfortably live on, direct the entire surplus towards your highest-value goals — such as reducing debt, boosting super, or investing.
“Unallocated cash inevitably gets wasted.”
Be realistic
Mr Wemyss says when it comes to big expenses such as booking a holiday, people tend to think very carefully because it's normally expensive, and they want to extract the most amount of pleasure and value from it.
“If we could approach every transaction transaction like that, people would be in a much better position,” he says.
He says being a bit more conscious about your spending habits is a good start, and to realise some weeks you're going to go a little over, while others will be a little bit under.
Separate accounts
Ms Carter says having offset accounts - separate transactional accounts that sit on the side of home loans – are really good for people who like to have ‘bucket accounts’.
“If you follow the Barefoot Investor, or you have multiple accounts because you like to see different monetary amounts for different goals… all of that cash and savings that you've got sitting in there will help reduce the interest on your home loan,” she explains.
Ms Carter says if you have separate banking accounts to your partner and a joint home loan, that is another way you can use your savings accounts against your home loan to reduce the interest on your balance.
Educate yourself
While people who need financial advice and help the most might not be in a position to pay for a professional, Mr Wemyss says there is an abundance of websites, news articles and blogs that can help.
“I don't think not knowing what to do is not the excuse,” he says.
“Educating yourself is easier today than it's ever been.”
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