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5 exercises you can do to start the New Year financially strong

Have you set some fitness goals to aim for in the New Year?

Many of us consider the turning of the year a ‘reset’. We almost believe we can flick a switch overnight and finally be the person we’ve always wanted to be.

Not to put a dampener on things, but changing habits doesn’t quite happen like that. To make lasting changes, you have to build a strong foundation. One habit on top of another habit, on top of another.

The same is true for our finances. We won’t “get rich” or even “feel secure” next year if we don’t regularly do some key financial exercises.

Here are the basics to put in place first so you can keep pumping up your bank balance as the year progresses.

1. Build your emergency fund

Think of your emergency fund as perfecting a basic push-up. Having some money set aside that is easily accessible and covers you for life’s unexpected expenses is the first thing you need to master

The general rule of thumb is that your emergency fund should cover at least three months’ worth of regular expenses, preferably six months’ worth.

If you don’t have an emergency fund already, you need to start setting money aside each month to grow one. If you worry that will take too long, consider earning your fund by selling some of your things – books, unused camping equipment, clothing and trinkets all sell well on places like Gumtree, eBay or Facebook Marketplace.

Once you’ve got the basics in place, keep putting in extra each month until you have a bigger pool of emergency funds to draw from.

2. Complete the insurance policy comparison circuit

Insurance is a necessary annual expense, but that doesn’t mean you should just roll over your existing policy and call it a day.

There are huge savings to be made by shopping around and comparing your current policy with what’s on offer in the market, so do some comparison circuit training.

Head to a website like Canstar, Finder or RateCity and plug in your details. Play around with things like your excess (increasing it reduces your annual premium), your level of cover (to reduce premiums, find a balance between fully protecting assets and cutting unnecessary features) and bundling your policies (many insurers offer a discount if you have more than one policy with them).

Once you’ve found a good deal, the next thing you need to do is get in touch with your current provider to let them know you’re planning to move your business. With a bit of luck, they’ll match your new deal. If not, follow through on your hard work and move to a new provider.

3. Stretch your investments 

One thing that’s a given in any asset market is that things change regularly.

To ensure your investment portfolio still matches your goals and your risk comfort-level, give it a good stretch.

  • Review your asset allocation – check the long-term investing outlook to ensure it still matches your objectives.
  • Check your diversification percentages – as the market changes, so can the way your money is spread across asset classes.
  • Rebalance your portfolio – sell down some investments and buy others to adjust your portfolio proportions. Remember that selling investments could generate a capital gains bill, so consider the tax implications before implementing a strategy. 

4. Jump over your automation gaps 

As this list shows, caring for your finances takes work; but you can make it easier on yourself if you automate as much as possible. That means you’ll do things like: 

Use a budgeting app – an app like Frollo or WeMoney will help you establish a rock-solid budget and keep on top of it.

Have more than one account – to help save towards things you want, set up a series of savings accounts in addition to your regular transaction account. You might have a ‘holiday’ or ‘new car’ account that you automatically transfer money to on a regular basis.

Autopay bills and loans – remembering to pay bills is a stress you don’t need in your life. Instead, put them all on direct debit or regular BPAY to ‘set and forget’. The only thing you need to ensure is that there is enough money in your transaction account to cover all expected bills each month. It’s a good idea to keep your emergency fund in the same account to act as a cushion.

Set up an automatic investment plan – one of the best ways to invest is through dollar-cost averaging, which means you invest each month regardless of what the market is doing. Talk to your broker or financial adviser about setting something up, then forget about it.

5. Heavy lift your property

For most people, home is the most valuable asset you’ll ever own, so it makes sense to keep it in tip-top shape. That means getting onto all those pesky maintenance tasks you’ve been putting off all year. Clear the gutters, plug the gaps, wash away the grime and let the sunshine in. 

This is doubly true if you happen to own one or more investment properties. Take care of the asset that takes care of you and you’ll also ensure your tenants are cared for, too.