29 September 2021 | By Lending People
Five steps to spring clean your finances
Worried about bad credit? Want to become debt-free faster? Maybe you want to see your savings grow? Here are five steps to help get on top of your finances.
Spring has well and truly arrived! If your finances could do with a spruce up, these five steps could help get your accounts spick and span.
Step 1: Figure out your starting point
Before you start spring cleaning anything, you need to have an overview of where everything is at.
- Take stock of your debts—we’re talking credit cards, anything you have on finance, student loans, anything outstanding Afterpay purchases, etc.
- Now look at your outgoings—think about any regular bills you have; look at any living expenses like food and petrol. Also, consider how much you’re spending on things like entertainment or clothes.
- Now look at your credit score—your credit score is essentially a number that indicates how financially responsible you are. You can check it for free at creditsimple.co.nz
Step 2: Set some goals
Now that you know where you’re starting from, you can figure out where you want to go. Destination: financial freedom! Think about what you want to achieve specifically.
- Do you want to improve your credit score? We have some tips on how to do that here.
- Do you want to become debt-free?
- Is there something specific you want to buy?
- Do you want to see your savings grow?
Make sure you set goals that are achievable—think SMART:
S – specific M – measurable A – attainable R – relevant T – time-bound
Step 3: Put together a budget
You know what you want to achieve, now you need to figure out how to do it. Luckily, you already worked out your outgoings in step 1. Take those away from your income and see what is left. If you wish there was a little more remaining, work out what you can cut back on.
- Could you find a cheaper phone plan?
- Could you eat out a little less?
- Could you make your own coffee rather than buying it from a café?
- Could you walk more and drive less?
- How badly do you need that new outfit?
Set yourself little challenges and you’ll be amazed at what you can achieve. Besides, just because you’re on a budget, that doesn’t mean all fun has to stop. The 50/30/20 budgeting system can be a useful approach since it still allows 30% of your income to be spent on what you want. 50% is spent on what you need (like rent, bills and groceries) and 20% is spent on financial goals, whether that’s saving for a rainy day, for something special, or paying off debt. As time goes on, budgeting becomes easier and more rewarding—eventually, you might even choose to spend less on “wants” and more on financial goals!
Step 4: Make things easier for yourself
Financial freedom doesn’t have to be difficult. Look for easy ways to get ahead.
- Set up automatic payments between your accounts. Time the automatic payments with your pay cycle so as soon as money comes in, it’s split between your savings account, spending account and bills account (and whatever other accounts you may have).
- Consider a debt consolidation loan to become debt-free faster. Debt consolidation loans can be beneficial if you have multiple debts on the go. They typically have lower interest rates than credit cards and then there’s the added benefit of having only one payment to make rather than several! You can read more about the benefits here. Or, if you’re already sold on the idea, you can apply for a debt consolidation loan online. You’ll get your outcome within 60 seconds!
Step 5: Celebrate your achievements
Taking control of your finances can be a big ask, so it’s important to take a moment to revel in your achievements.
- Check-in on your savings and remind yourself of where they started.
- Count down the days as you get closer to becoming debt-free.
- Revel in the joy when you can finally afford that big purchase!
It’s all relative and you should take pride in every accomplishment regardless of how big or small it may seem.