There's no denying that many Australians grappled with financial challenges in 2023, from interest rate rises to high inflation and a rental crisis.
And with more of the same expected in 2024, trying to save for a financial goal when things are so tight is no easy task.
So, for those of you who have enough spare cash to put away towards a holiday, car, or maybe even a home, here's where the money experts suggest you start.
Set some financial goals
Financial wellness coach Betsy Westcott says writing down your money goals is an essential step to help you make them a reality.
"The most effective money goals include what it is you want to achieve, when you want to achieve it, how much money you need, and why," Ms Westcott said.
"The 'why' you want it is important for anchoring your emotions to your goal so that when tempting purchases come along that might derail or delay your goal, then you have a compelling reason to resist.
She says the government's Money Smart's savings goal calculator can help work out how much you need to put aside.
"For example, Lisa wants to have $10,000 in emergency savings by January 2025 so she can handle any unexpected financial setbacks.
"From there, Lisa works out how much money she will need to save from every pay cheque to achieve her goal.
"Using Money Smart's savings goal calculator, Lisa needs to save $813 per month over the 12-month period to reach her goal (assumes she's earning 4.5 per cent interest on a savings account)."
Revisit and revise your budget — or create one from scratch
Ms Westcott says the best budgets are ones that are "realistic".
"They cover your day-to-day living with a little extra fat but also allow you to contribute to your long-term goals and financial security.
"Budgets most often fail because we forget to budget irregular expenses, we forget to budget in fun and gifts, or we're just too restrictive and they're not sustainable."
If you're unsure which budgeting method to try, here are some suggestions from Ms Westcott:
- 50/30/20 method — spend 50 per cent of your income on your needs and necessities, 20 per cent on savings or debt payments, and 30 per cent on wants
- Bucket method — organise your expenses into different accounts for different purposes
- Zero based method — where your income minus your expenses equals zero. If you make $3,000 a month, everything you give, save or spend should add up to $3,000
If you're thinking about using a budgeting app, Ms Westcott says they can be great for analysing historical spending or for tracking how closely you're on top of your budget.
"Think of them as a tool for monitoring your money.
"When it comes to determining what's right for the budget, that's going to require some personal effort and thinking."
Independent Wealth Advice financial advisor Andy Darroch says there are plenty of budgeting apps to choose from to help you reach your money milestones.
"Budgeting apps are definitely very helpful," Mr Darroch said.
"But many people also use the humble Excel spreadsheet, while some banks even offer data on your spending habits."
Start building a savings pot — or add to your existing one
When payday rolls around, it can be tempting to treat yourself after you've finished paying off bills.
So before you splurge on items you may not need, be sure to transfer the appropriate funds to a designated savings account — whatever you have left over is for spending.
Better yet, you could even take the thinking out of this habit by setting up automatic transfers from your wage to a savings account. This way, you won't sabotage your own efforts by "forgetting" to transfer the money and leaving it to be (potentially) spent.
If you have a budget, you'll be able to work out exactly how much money should be allocated towards your pot.
Ms Westcott says we should also consider separating our savings pot into smaller, specific pots.
"It's easier to track your progress for different goals such as a car, holiday, and house deposit when they're in different accounts.
"Another reason why this is beneficial is because you might be using different saving strategies for each goal.
"For short-term goals like a new car or a holiday you're going to be saving money in cash, but if it's for a longer term goal like retirement, then you might be using investing as a strategy."
Get reacquainted with your credit score
Enter the new year knowing what lenders see when they look at your financial profile — and avoid potential future headaches.
You have a right to obtain a copy of your credit report for free every three months from reporting agencies Experian, illion, and Equifax.
Make sure to check the report carefully for any inaccuracies.
Money Smart suggests checking that:
- All the loans and debts listed are yours
- Details such as your name and date of birth are correct
If you do find an error, you can contact the agency and ask them to fix it. This is a free service.
Top up that rainy day fund
Do you have a financial safety net should you run into unforeseen circumstances?
If not, the experts recommend building an emergency fund. Think of it like a squirrel hoarding nuts for the winter. Instead, you're stashing away some cash.
"Not having emergency savings means you're vulnerable to having to borrow money or make less-than-desirable decisions when something bad happens," Ms Westcott said.
"If you have no emergency savings today, start by setting a goal of $1,000.
"You could save up money from your pay cheque or you could hustle up some extra cash by selling items you're not using, or picking up extra income through odd jobs."
The general rule of thumb for an emergency fund is setting aside three to six months' worth of living expenses for unexpected events — like a sick pet, a drop in income, or a broken-down car.
Without a financial buffer, you might have to resort to taking out a credit card or dipping into your holiday savings fund, which is not what that money was intended for.
Tackle your credit card debt
If you've racked up some serious debt, Ms Westcott suggests, where possible, paying off your debts from biggest to smallest.
"Write a list of all your debts and include that amount, the repayment, the balance and the interest rate.
"Then focus all your spare cash at paying off the most expensive debt first, because that's the one costing you the most money.
"You could consider things like a debt consolidation loan or balance transfer but be sure to understand the pros and cons of this option before you undertake it."
Remember, every day you keep a credit card it's costing you money, unless you pay off the debt in full each month.
Review all your policies
I get it. It can sometimes be a little confronting to ring up your policy providers and ask for a better deal. You don't want to deal with the awkward back and forth conversation until finally someone gives in — you either get the discount or you don't.
While that may be your thought process, Ms Westcott and Mr Darroch agree that it's worth contacting your insurance providers for two reasons:
- To ensure the policy is still appropriate for you as life circumstances change
- To not get hit with the "lazy tax" — you get charged a higher premium because you haven't negotiated a better price
But before you go and give them a call, make sure to do your research to compare other deals on the market, and be kind to the person on the phone.
What you need versus what you want
Needs are things like groceries, paying rent or mortgage, accessing healthcare, and paying utility bills.
Whereas wants are things like new clothes, the latest iPhone, and an overseas holiday.
"Our wants deserve a little more attention and interrogation before we part with our money," Ms Westcott said.
She recommends asking yourself the following questions when determining whether a want is really a good purchase or not:
- Will I want this in 24 hours' time?
- How many hours would I have to work to pay for this?
- Is there a better-value alternative?
- Do I want this more than (insert financial goal here)?
Disclaimer: This is general advice only. Please see a professional for advice on your individual financial circumstances.