2022 is here! Combining aspirations with New Year’s resolutions, many of us are committed to changing the way we live for the better. Some of the most important things people focus on are personal finance, money management and investing.

A word of advice – you may find it hard to navigate your way to financial independence on your own. If you’re starting the climb towards financial freedom, here are 5 tips you should follow to set financial goals for the new year.

Tip 1: Assess Your Position

You first need to know where you currently stand before you can set realistic financial goals. This first step is the most intimidating/stressful part of the process but, by assessing your savings, debts, and investments, you’ll be able to set realistic targets for the year.

If you don’t have past data to look at, now is the best time to start tracking. Tracking every part of your income and expenses, month on month, will not only give you an insightful picture of your finances, but can also help you plan better for any financial decisions. Looking at your spending may help you differentiate between your wants and needs, and could also foster a quicker change in your spending habits.

Tip 2: Set a Realistic Budget You Can Stick To

Budgeting is the most important thing you can do to be financially successful. There are many people who struggle financially, even with a high disposable income. This is largely due to them not budgeting well. Managing your money has two integral parts – creating a budget and sticking to it.

Need to manage a household on a budget? Read our blog guide here.

Tip 3: Pay Off Your Debt

Getting out of debt is another key step to taking control of your finances and significantly lessening the burden.

Start by paying off debts with the highest interest rates as soon as possible. This will instantly reduce the amount of unnecessary expenditure. For example, if you have $10,000 in credit card debt and pay 22% interest on it, you’re paying $2,200 every year in interest alone, never mind your purchases. Commit to clearing your highest interest debt first and you will be able to save or use that money elsewhere.

Tip 4: Establish an Emergency Fund

Unforeseen emergencies pop up occasionally and usually at the most inappropriate times. Let’s face it, life happens to the best of us. Even with proper planning, your budget could fall apart from such situations. If you haven’t already done so, it is important to establish an emergency fund to protect you against emergencies without breaking the bank.

Your emergency fund should hold approximately 6 months’ worth of savings where you only touch it in emergencies like losing your job or falling ill. This fund gives you the peace of mind that, in case anything unexpected happens, you have 6 months to work something out and pivot stress-free onto your next path.

Tip 5: Plan for Retirement

Regardless of your age, you should have a rough preparation plan for retirement. The first step towards this would be discovering exactly how much you need to retire. Knowing your number will help put your savings into perspective and give you a road map for your future.

Read our blog on retirement strategies here.

Bonus Tip: Stay Organised

Setting budgets and goals is great, but these efforts are futile if you do not stay on track. Staying organised is a critical step to meeting your financial goals. Here’s an idea to consider – why not gamify your progress to keep yourself accountable? You’ll have fun along the way, measuring your journey throughout the year.

There you have it. Does that New Year’s resolution seem a little closer now?

This year brings new possibilities for everyone. Remember, the journey to financial independence can be just as rewarding as the end goal. Celebrate each win, no matter how big or how small, and you’ll find that it helps you focus better on the financial success you’ve been striving for.

Want to hit all your financial goals effectively? Speak to one of our team on 1300 815 921 or at info@greenassociates.com.au.

At Green Associates, all of our advisers are fully licensed and listed on the ASIC Moneysmart Financial Adviser Register. Green Associates is committed to providing the best solutions for you and your wealth-creation journey.