R.E.S.H.A.P.E. your 2020 finances

We’ve pulled together a money plan for your finances.

  • 11 February 2020

    Teachers Mutual Bank is not a financial advisor. Always consult your financial advisor before making any decisions.

    As we welcome a New Year, now is the perfect time to give your finances a little love with a money plan you can stick to.  

    Has the New Year’s resolution-game worn a tad thin over the years? What if there was another strategy that would put you in a better place financially, so you don’t look back with the same reflections in 2021?

    We’ve pulled together a money plan for you to R.E.S.H.A.P.E. your finances. And it’s not that hard if you remember these 7 letters and what they stand for.



    R is for REVIEW

    The first thing you need to do is review your financial position. This is pretty straight forward - it’s listing everything from your assets, income, savings, investments and your super. It's also important to know what you are spending your money on, as those little expenses can add up. By reviewing you can see at a glance everything you earn, save and spend, as well as which way it is trending, hopefully not down. But more on that later. 

    E is for ELIMINATE debt

    As debt can accrue high interest rates, paying down any credit card or personal loan balances should be high on your priority list. Ideally debt should be no more than 30% of your income. If it’s more than 30% that’s a downward trend and your aim over the year should be towards lowering that percentage rate. The key to eliminating debt is to make a plan and stick to it, so you can get rid of it fast. The MoneySmart website has great tips to get on top of your debts like prioritising debt, paying off balances with the highest interest rate first, setting budgets and making repayments automatic.

    S is for SET a budget

    There are many ways to do this but the 50/30/20 Budget Rule is an excellent place to start. What's this all about? 

    • 50% Needs: Needs are the absolute necessities you need to survive and the bills you have to pay. These include rent/mortgage, car repayments, groceries, insurance, healthcare, and utilities. If you are using more than 50% of your monthly income on these things, then something has to give. 
    • 30% Wants: Wants are the nice to haves, the things you can do without if you have to. It's those long Sunday lunches, another pair of shoes, and all those streaming video services for Friday night TV binging. 
    • 20% Savings: We all know what savings are. Whether we apply ourselves to it is an entirely separate thing! Often it's because we don't know how much we need to save. The 20% rule is a good place to start. 

    H is for HONE in on your daily spending

    You don't need to walk around noting all your expenses with a paper and pen. But you can use a budget planner to log your expenses. The more you know about what you do with your money every month, the easier it is to manage. You’ll also be able to track if you are overspending on specific categories. 

    A is for AUTOMATIC savings

    Set up a monthly savings amount and have it automatically transferred to your savings account every payday. Making it automated means the money is moved before temptation hits. Forming financial habits can be hard, however once you set up an automatic deposit the habit of saving will develop by itself. 

    P is for PLAN for retirement

    You’re never too young to start thinking about superannuation. The earlier you start saving for retirement, the more you'll have when you retire. Look into any employee co-contributions or government subsidies available to you. The bigger your nest egg, the more stress-free retirement will be. 

    E is for an EMERGENCY Fund

    An emergency fund is a buffer. It's what you may need if you have an unexpectedly large bill, a loss of income or something else that gives your finances a jolt. Recommendations for the amount you’ll need vary from having enough to pay for a couple of months to 6 months’ worth of expenses. The important thing is that this money has to be easy to access. So it should sit in an account you are able to withdraw from, but only in emergencies.  
     
    If you put all these simple steps into action, you will not only R.E.S.H.A.P.E your finances, but have a plan you can stick to.

     
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