It’s the New Year again. As we look forward to 2019, we have put together a few bits of financial advice to ponder while considering your New Year’s’ resolutions.
Pay Yourself First
A quarter of Australians have less than $1,000 in savings. If you’re one of those people, or if you’re not saving enough for retirement or emergencies, now is as good a time as any to start. $1,000 may seem like a comfortable cushion, but it won’t even cover the cost of some car repairs. For retirement, you’ll need far more money, around $545,000 for a single person, or $640,000 for a couple.
Pay Off Your Debts
Paying off credit card debt can help more than investing money. Imagine you put $1,000 in the stock market. After a year, with a 6% return, you’ll have made $60 on your investment. Now, imagine that over the same year, you have an unpaid credit card debt of $1,000 that accrues interest at 14.9%. After a year, you’ll have lost $149 on that debt. Even taking into account the $60 you made with your investment, you’ll still be out $89. Paying off the debt is the better choice in this case.
Consolidate Your Debt
If you have multiple debts, like a mortgage and two credit cards, you can sometimes get a better rate by consolidating your debt into a single bank loan or Line of Credit.
Ask a friend or family member to help you stay accountable. For many people, the buddy system is a good way of keeping themselves honest. Make a savings or a business plan, and ask a friend or family member to check up on you from time to time. It’s easier to resist dipping into savings for a new flat screen TV when you know your partner is going to read the bank statement.
Cars Are Not An Investment
According to Carfax, a new car loses 10% of its value when you drive it off the lot and 20% of its value in the first year. It will continue to lose value as it gets older. New and used cars alike will eventually need costly repairs and maintenance. If you need a car, buy one, but a car is not a replacement for savings.
Hire a professional. For many people, especially small business owners, managing finances, savings, bank loans and taxes can be overwhelming. Getting financial advice from an expert, or hiring them to manage your finances, may save you time and money.
Learn To Say “No”
Are you eating out a lot, or running the air conditioner when you don’t need to? Small expenses can add up over time. Imagine a person who skipped one $50 restaurant meal per month, and made a meal at home for $10 instead. That savings of $40 per month adds up to $480 per year. This money can be saved, invested, or put into a small business.
Anyone can invest in the stock market. There’s a common misconception that you have to be rich to invest in the stock market. With new companies like Stash and Raiz, you can automatically invest a certain amount each week, or save what you can, when you can. You can even invest “change” on debit card purchases, so a $2.73 coffee purchase would be rounded up to $3.00, with the $0.27 invested.
Remember, credit checks can damage your credit score. A single credit check can cause your credit rating to drop by as much as 5 points. This isn’t a big deal when you take out a loan, because you’ll build far more credit by paying the loan back. It can become problematic, though, if you apply for several loans at once while comparing rates. A good strategy is to shop around, ask a lot of questions, and only apply for the loan you’re sure you’re going to take out.
Make sure your insurance is up to date. This is something everyone should be doing annually. If you have private health insurance, you’ll want to make sure that’s current. If you have life insurance – you should – it’s a good idea to look at your life’s circumstances. If you’ve bought a larger house with a larger mortgage, for example, or have had a baby, you’ll want to increase your coverage.
Similarly, if you’ve had a child go off to University, you may be able to lower your coverage. If you have a business, it’s important to make sure your liability coverage is enough to cover your current business needs.
If you find yourself in need of a financial helping hand in 2019, speak to the experts at &Solved, and find out how a Line of Credit could be the right choice for you.