As the year moves on, so do the well-intentioned resolutions made on New Year’s Eve.
If this seems familiar, you’re not alone. A study by the University of Scranton in Pennsylvania has found that of the people who set resolutions only 8% accomplish them and 80% don’t even try to keep them.
The study also found that 55% of resolutions were health related, such as exercising more and eating better or getting out of debt.
Financial resolutions can be difficult to keep. People tend to spend more than usual over the festive break and because many companies pay December salaries early it can be a long wait until the January pay cheque.
The Importance of budgeting
Download our budget template to guide you through the process.
The first step in setting financial goals is finding out where your income goes each month. It’s reasonably easy to do. List all your income on the left-hand side of piece of paper and all your monthly expenses on the opposite side. You should be able to get most of the information from your monthly bank statement.
This will give you a clear picture of how you’re using your money and where you may need to make changes in your spending, saving or investment habits.
Repeating this exercise regularly is a good way of monitoring progress.
Check your credit score
Next, check your credit score. This is the rating that everyone including landlords, credit providers and retailers use to find out how financially reliable you are. A poor credit score will limit your ability to access finance or may result in you paying higher interest rates as you’re considered a greater risk.
By law you’re entitled to ask any of the credit bureaus for one free credit report annually. Alternatively, you can use free online tools such as Pulse as often as you like. Other benefits of tools such as Pulse is that they provide additional information on how you can improve your score and the ability to track it over time.
Regularly checking your credit score allows you to ensure that the credit bureaus haven’t made any mistakes and that nobody is using your profile to access credit. A sudden decline in your score could indicate that a fraudster is pretending to impersonate you to borrow money or open accounts.
Your budget will give you a clear understanding of your monthly income and expenses and the credit score provides an independent view of how financially reliable you are. With this information you can start setting and prioritising your financial goals.