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How do I make my new years resolutions work?
After having some time off over xmas many of us start thinking about what we want to achieve over the coming year. However as the year moves on our new years resolutions often disappear into the ether, never to be seen again…or until next new years! So how do you increase your success rate?
Have an emotional connection to your goals
It’s our heart and feelings that really motivate us. However we often use only our heads and logic to achieve our goals. If you can find an emotional connection to what you want to achieve you will often dramatically improve your chances of success. I had a client recently whose goal was to save for a house deposit. She earned a good income but her financial discipline left a lot to be desired. She set up a savings account in a separate bank from her main banking, so she wouldn’t be tempted to use the funds when she saw them. That still didn’t work so I had her change the name of her account to House Deposit Savings and since then she has continuingly saved. She just needed a more emotional link to help her make the changes she needed to get money into the account.
Ensure that your goals are realistic
Often we get really enthusiastic and make our goals too ambitious. Let say your goal was to pay off your debts. I’ve seen many clients who have tens of thousands of dollars in debts and they just don’t know where to start. Be brave and make a list of all your debts, the interest rate, minimum payments and term, etc. This may seem simple but often people avoid this because it puts the amount they owe right in front of them. Having it all laid out in black and white can be scary, however it’s the first step in being debt free. Look at your budget and find as much spare cash as you can and start making regular extra payments to reduce your debt. Update your balances every month so you can see how your debt balances are reducing. Even a small amount will make a difference. Of course the more you can pay off the better. Imagine how you will feel when you have paid them off. And as an added bonus once they are paid you can now put that money into savings.
Break it down
One of my favourite sayings is ‘How do you eat an elephant? Bite by bite.” Often we get really overwhelmed by what needs to happen for us to achieve a goal. Break your goals into a number of small tasks. Then just focus on achieving one at time. I’m a fan of writing your tasks down and then crossing them off once you achieved them. It’s really satisfying seeing your list with lots of crossed at lines on it. Using a big black pen can be even more satisfying. If you take this approach you will be often be surprised how quickly all those little tasks add up and you will have achieved your goals before you know it.
Are you being smart with debt this Xmas?
Xmas can be a trying time when it comes to paying bills – expenses like presents, travel and Xmas dinners can really put stress on finances. The last few years of financial uncertainty have seen an attitude shift among New Zealanders towards debt and the country has been experiencing its first positive savings rate in over a decade. But during times of financial pressure, like Xmas, turning to credit can seem like an easy option but it can often be dumb debt.
Current trends in Kiwis’ dumb debt
- Consumer debt has been decreasing since December 2008, when it reached a peak of $12.6 billion. Since, total consumer debt has decreased by $1 billion and now stands at $11.6 billion (as at August 2011); and has decreased by 1.2% over the past year.
- Of the total current consumer debt, $5.1 billion (as at August 2011) comes from balances outstanding on personal credit cards.
- Of the $5.1 billion in credit card debt, $3.5 billion (69%) is interest bearing, and carries an average interest rate of 17.8%. Over the course of a year that outstanding balance will cost those cardholders $623 million in interest.
- The current savings rate is estimated at 1.9%, which means that for every $100 Kiwis earn they are saving almost $2, recently only becoming positive for the first time since the early 90s.
What is the real cost of Xmas dumb debt?
The cost of $500 Xmas groceries, paid for on a credit card with an interest rate of 18% at different repayment levels:
| Monthly repayment | Time to repay | Total interest | Total cost |
| $10 | 7 years 10 months | $431 | $931 |
| $20 | 2 years 8 months | $131 | $631 |
| $30 | 1 year 8 months | $80 | $580 |
| $40 | 1 year 2 months | $58 | $558 |
| $50 | 11 months | $46 | $546 |
Table 1 – Source: Sorted Credit card calculator. Figures rounded to the nearest dollar.
$1000 worth of hire purchase with an interest rate of 25%, start up fees of $50, including an interest-free period of six months, repaid over different time periods:
| Term | Monthly repayments | Total Interest paid | Total cost |
| 6 months | $175 | $0 | $1,050 |
| 12 months | $91 | $38 | $1,088 |
| 24 months | $50 | $157 | $1,207 |
| 36 months | $37 | $293 | $1,343 |
Table 2 – Source: Sorted Hire purchase calculator. Figures rounded to the nearest.
| Dumb debt is high interest consumer debt, like credit card and hire purchase, which could be avoided. |
To work out other repayment times and interest amounts on dumb debt go to www.sorted.org.nz/calculators.
Need to stretch your dollar further over xmas
Xmas is an interesting time of year. Its a time where we spend time with family and friends and most of us get to have a holiday. Its also the time of year which is the most stressful financially for so many people. Good planning well ahead of time can greatly reduce our finanacial stress however that is often far easier said than done. Here are some tips that you might find useful to help make your money go futher:
- Have a look through websites and see what bargains are available. There are a number of special discount sites that are now available like www.grabone.co.nz or www.treatme.co.nz
- Start buying for Christmas as soon as you can so you make the best of the sales
- Check your credit card or other loyalty programmes to see what gifts you can trade your points for.
- Scope out your job perks – does you company have any deals that you can utilise for Christmas.
- Look for two-for-one deals – are there any that would be ideal for gifts, i.e. buy one magazine subscription and get another for free.
- The gift of photos – you do have any doting grandparents on your list? Make photo albums with pictures of your children. With the latest technology you get a really professional product for a reasonable price.
- Re-gift it – carefully of course – the item has to be in perfect shape, you have to remember who gave it to you (heaven forbid you return it back to the original giver) and it has to be a better fit for your recipient than it was for you.
- Check out garage sales – we don’t have as many as we used to before the internet but you may find some great bargains.
- Clean out your cupboards – how many of us have bought things that we have never used, maybe you will find something that will make a great gift.
- Bring out your culinary skills – with home baking becoming rare because many of us are too busy, people love to receive home made cookies, preserves, jams etc.
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