The party is over and it is time to take stock of the financial damage done by holiday excesses. If you are feeling as though you have a money hangover, here is what to do so you can get back in control of your finances.
1. Face the reality of your position.
Make a list of all your assets (house, car, KiwiSaver and other investments) and your debts. The difference between your total assets and your total debts is your net worth. If you are managing your money well this figure should be higher than it is was at this time last year.
2. Find out where your money goes.
Go through the last three months of bank and credit card statements. Put the transactions into three categories: financial commitments (such as rent, mortgage, insurance), discretionary spending (eating out, entertainment, gifts and other non-essential items) and essential spending (food, transport etc). Look in particular at how much you are spending on non-essential items.
3. Start saving.
Decide how much you want to save each pay day and set up an automatic transfer into a savings account for this amount on your pay day. Allocate your remaining income into each of the three categories above and set up a bank account for each one.
4. Make good choices with your savings.
Use your savings to progressively do the following:
• pay off high interest short term debt
• set up an emergency fund
• save for short term goals such as holidays and home renovations.
Feeling a bit overwhelmed by what needs to be done? If nothing else, set up an automatic transfer to save a small amount each pay day, even if it is only $10. Gradually increase the amount throughout the year and you will be surprised how it mounts up.