Small steps can lead to financial freedom

August is Te Ara Ahunga Ora Sorted Money Month, the annual campaign designed to help everyday people be better with money. At Avanti, you might say every month is Money Month and we’re always looking for ways to support you to get where you want to be. In the spirit of this year’s theme, ‘Pause, get sorted’, we’re sharing some tips.

Life moves quickly, especially in uncertain times. Every so often it can pay to pause, get your money sorted and then keep moving toward your financial goals.

Trying to tackle your whole financial situation at once can be downright daunting. We recommend breaking it down into different areas that can be approached separately and sorted, one step at a time. In this article, we get into three fundamentals of financial health: Budgeting, Saving and Debt Management.

Within each area, we’ll provide practical tips. By themselves, they may seem small (and that’s the point) but together and over time they will help you build confidence and take control of your financial future.

Budgeting

A well-planned budget is fundamental to financial security. It puts you in the driver’s seat, steering your future in the direction you want it to go. A good budget can mean the difference between being able to plan ahead versus just getting by. At its core, budgeting is just a plan for spending that takes into account the money coming in and the money regularly going out. It doesn’t need to be complicated.

Get started by adding up how much money is coming in. Next make a list of all the money going out (your bank statement makes a handy reference). You’ll want to look at regular expenses like rent or car loans, subscriptions like Netflix as well as spending that’s semi-regular like the hair salon or Uber Eats.

Build your monthly budget plan to cover your regular expenses but don’t forget to work in savings for your longer-term goals. As time goes on, revisit your budget and make adjustments as needed.

Budgeting Tips:

• Be sure to set a budget that’s realistic to your income and lifestyle. If it’s too hard to follow, you’re more likely to fall off the wagon.
• On payday, give each dollar a job! It makes your money goals easier.
• Track your spending. This will help you see where your money is going and identify areas where you can cut back.
• Set up automatic payments for your bills and automatic account transfers for your savings. This will help you stay on track and avoid late fees.

Budgeting can be a challenge, but it’s worth it to be in control of your finances. By following these tips, you can create a budget that supports the future of you and your whānau.

For a deeper dive into sound budgeting, check out: 8 Steps To Make A Yearly Budget.

Saving

Saving money isn’t just for big purchases and special treats, it can also provide a secure safety net when unexpected things happen. Saving gives you options, more saving gives you more options.

For many people, saving is an afterthought – literally. They wait until AFTER bills and other expenses are paid to see if they have anything left. But really – like pretty much everything to do with managing money – saving is best achieved with a plan.

Start by reviewing your budget and deciding how much you can set aside for savings. As soon as you get paid, transfer that amount to a separate account. If you can stay in the habit, you’ll soon be watching it grow.

Savings Tips:

• Planning a purchase? Sleep on it, chat about it, and wait a few days. Time will tell if you really need it.
• Automate it. Create a separate account for savings and schedule an automatic transfer for each time your pay rolls in. While you’re at it, set up auto-payments for your bills to avoid late fees.
• Set both short-term and long-term goals so you’ll always have something to keep you motivated.
• Don’t give up. Every little bit counts – your future self will thank you!

Even if you can only save a small amount each month, it will add up over time. And who knows, you might even find that you enjoy the challenge of saving money!

Debt Management

Easy to get into, harder to get out of – debt doesn’t have to be daunting. Like most aspects of managing your money, dealing with debt is best done with careful consideration and planning.

Start by sitting down and taking a look at your debt. Ask yourself, is there any small debt you can pay off right away? Eliminating even one creditor is a great feeling and can really get the ball rolling.

Next, consider the interest rates. Focus on paying down your debts with the highest interest first (like credit cards), this can help you reduce what you owe faster.

Debt Management Tips:

• Pay off your debts with the highest interest first to get debt free faster.
• When you can, try to make more than the minimum payment. This can help save you money on interest.
• Consider consolidating your debts into one loan with a lower interest rate. This can make it easier to manage your payments and save money on interest.
• If you’re struggling to make your payments, talk to your creditors. They may be able to work with you to lower your interest rate or monthly payments.

Managing debt can be difficult, but it’s important to remember that you’re not alone. There are many resources available to help you get out of debt and improve your financial situation.

For more on managing your debt (and avoiding it when it’s not sensible), check out these articles.