It's all starts in January
January is a great time to reflect on the past and combine the lessons we've learned with our ambitions for the year to come. That’s right, we’re talking about the notorious New Year’s Resolutions. They’re famously difficult to keep, with those involving money being the toughest of all (except maybe for our over-ambitious New Year’s gym schedule).
We want to help you decide on the best financial goals for the New Year, so we've built a list of financial New Year’s resolutions to adopt, and we’ve shared advice on how to achieve them.
Whether you want to save for an emergency fund, make your annual budget plan or finally start a personal savings account, you’re sure to find something in our ultimate list of New Year's resolutions to help you reach your financial goals.
Automate your Savings
This has fast become a savvy trend helping people save efficiently, providing an easy option to use technology to do the hard work of remembering to save. Incorporating the right money management apps into your New Year financial planning can help you keep a close eye on your monthly budget. Check out Wonga’s recommended list of Financial apps to make your life easier here.
Start that emergency fund
Potentially one of the most important New Year’s resolution you’ll ever make. An emergency fund is a sum of money set aside to cover financial surprises. These unanticipated events can be stressful and expensive. This is one of those special points that need to be high up on your New Year's resolutions
Here are some of the most common emergencies:
- Job loss or retrenchment
- Medical or dental emergency.
- Unexpected home repairs.
- Car troubles.
- Unplanned travel expenses.
With these considerations in mind, having an emergency fund set aside can help you deter the financial pressures that come with an emergency. It can also help to keep money out of reach in a separate account, monitor it as a savings option, and help it grow whenever possible. The Covid pandemic demonstrated how quickly things can change, from job loss to salary reductions.
Here are some of our top tips to getting that emergency fund going
Set several smaller savings goals, rather than one large one
Saving money in the New Year is much less daunting if you set yourself up for success from the start. Rather than three months' worth of expenses right away, aim for one month's worth. even for two weeks. Do everything possible to make your initial goal appear feasible.
After achieving your initial goal, you may find the motivation to continue. Set a higher standard for your second and third goals. By then, the habit of saving will have formed, and the positive incentive created by achieving your smaller goals will encourage you to work toward your larger ones.
Start with small, regular contributions
Finding an area of your life where you can cut down, such as your monthly spending habits on non-essential items, is one of the finest New Year's resolutions to help you save money.
Decide on an amount, whether it's R50 or R1000, and commit to saving on a regular basis: every month, every week, or every time you get paid. The most important thing is that it becomes a habit.
Don't over-save in your Emergency fund
Or to be more precise, don't put too much money into your emergency fund. An emergency fund is a source of immediate cash. That implies that you are probably keeping money in a low-yield investment like a savings account that pays a dismal amount of interest. You should stop making contributions to the account once you've accomplished your main objective just for that reason. Start making deposits into an account where they can begin to generate income on their own, ideally your retirement accounts where time will allow them to grow.
Develop a monthly budget habit
The best way to reach financial objectives is to establish a strict monthly budget for the New Year. You've probably formed the necessary habits if you've been budgeting for a while. If this is all unfamiliar to you, you must be strict and track every penny that leaves your pocket. Never let your spending habits dictate how much money you have available. Rather, sit down today and make plans for 2023. Your budget should determine how much you spend. You can use an excel budget template to help you get started with this.
Boost your retirement
Often more difficult than it sounds but if you have any extra funds available at the end of the month, one of the best ways to maximise it in the long run is to push it into savings. This could be a savings pocket or a tax efficient investment account.
Open a tax efficient investment account
You will already be contributing to your retirement if you are a member of a pension or provident fund. If not, a retirement annuity (RA) is a suitable tax-efficient choice that allows you to select your investment funds within the limits specified by the retirement fund regulator. You can also use a RA to supplement your current donations. If your budget allows, you can set up a RA for your children, allowing them to benefit from compounding interest from a young age. Learn more with these options.
Here are a few Retirement Annuity Options available to you
- Allan Gray | Retirement Investments | Retirement Annuity
- Options at retirement | South African Retirement Annuity Fund (oldmutual.co.za)
- Retirement Annuity | Save for retirement - Discovery
- Sanlam Cumulus Echo Retirement Annuity
It’s a good decision to see any of these financial advisers to give you the best advice on the direction you need to take to secure a better retirement.
Understanding your Tax
Another worthy New year’s financial goal and one of the most important ways to make every New Year a financial success is to invest more. This could be as simple as opening a retirement annuity or as intricate as buying shares in multiple platforms. Although each requires a certain level of knowledge and understanding, many of them will need to be worked through on tax and understanding how that affects you is a critical part of better saving, investing, and money management.
Improve your credit score
If you're concerned that your credit score isn't high enough, or if you've already had an application denied, don't worry; there are ways to raise your credit score. It’s also important to fully understand the impact that loans can have on your score. We recommend reading our full guide here: Are quick loans safe to use?
Some of these approaches are only effective in the long run (it usually takes six months on average to see an improvement in your credit score), while others can provide an immediate boost. The solutions suggested here may even enhance your credit score within 30 days.
- Avoid using credit
- Settle accounts where possible
- Reduce your credit ratio
The difference between what you owe and what your credit limit is has an impact on your credit history. This is referred to as your credit utilisation ratio; For example, if you have R20,000 in available credit and debt R10,000, your credit utilisation ratio is 50%. It’s always best to keep your utilisation ratio lower than 20% whenever possible to have a good credit ratio.
Learn more about how to Improve Your Credit Score.
Get financially smart
There is a fantastic variety of recommended books on personal finance that have been written for the layperson. They’re easy to read, incredibly informative and will give you the tools to take control of your money matters. Make it your goal to read at least one of them this year. Alternatively, if you prefer your education on the go, you could always listen to a personal finance podcast. Here’s our list of top five podcasts.
Wonga also has its very own Money Academy where we showcase bite size snippets to better understand the four pillars of your personal finance.
Check in with your finances every week
Quality finance starts with keeping track of how you spend. This could be as easy as logging into your banking account on a daily or weekly basis to take a money minute and review all pending and existing payments and purchases. With a credit card often having a delayed update on how you spend, it's important to make sure how many of those transactions are still pending to calculate a true figure. This gives a great overview and keeps you from not going over your set budget.
Reduce your expenses
If you don’t have an emergency fund in place and you’re only now learning how to budget, use this opportunity to review your expenses and see where you can cut back. Writing down a detailed list of every transaction you make in one month is a great way to put things into perspective: it helps you realise just how many automatic deductions go off your account, which of them are redundant, and how much of your expenses are towards expenses that are not aligned to your financial goals. Could you get cheaper phone packages for your teenagers? Do you have to eat out three times a week? Most people could save upwards of R1,000 simply by cutting back on frivolous spending.
Don't let January get the best of you; instead, use those emotions to work toward achieving your financial objectives and making this New Year better in all the important ways.
Read more from our blog:
- Take the annual money saving challenge
- Save more money this Christmas
- Are you getting the cheapest loan rate?