Don’t let what you cannot do interfere with what you can do.
JOHN R WOODEN
It’s going to be another interesting year, but then aren’t they all!
Already we are at the end of January – how are your New Year’s resolutions looking? Probably not too good if the latest research from Finder.com.au can be believed. According to them, a third of Australians will have broken their resolutions by the end of January and four out of five will have forgotten about them by 30 June.
One of the main reasons this happens is because people try to do too much too quickly, become disillusioned, and then give up.
The solution is to understand that success or failure seldom comes in one single cataclysmic event – usually it is the result of countless small actions done, or not done, over many years. It doesn’t matter whether you are trying to get your finances in order or lose weight, the only strategy that works is to establish a pattern of conduct that you can live with long-term.
For many people the problem is not desire, it’s getting started: procrastination. There are two sure ways to beat it – tackle it head on, and then put “set and forget” strategies in place to ensure essential tasks happen automatically and are not just more chores to be done when you get around to it.
Converting your home loan repayments from monthly to fortnightly is a great example. All you have to do is complete a bank debit form and then put it out of your mind. It is a guaranteed way to save a fortune in interest and is effortless. Borrowing for investment and reinvesting the dividends is another great way to boost your finances – once it is all in place you have nothing else to do but pay the interest.
Key areas where inertia costs big dollars are expensive mobile phone plans, inappropriate credit cards, unused club and gym memberships and paying too high a rate on your home loan. Most of us can make large savings in these areas, and the way to get going is to simply dedicate one hour of your life to getting started.
Begin by listing all the things in your life that you pay regular fees for and then sort them into two piles – discard or keep. The discard pile is for things you haven’t used in the past six months, like unused subscriptions or club memberships. The keep pile is for must-haves like bank accounts, loans and credit cards.
By now you will probably be amazed at how much money the items in your discard pile are costing you. Cancel them right away, and if you’ve got a housing loan make sure you increase your home loan repayments by the amount you are saving, so the actions you have just taken will give you long term benefits.
The keep pile will need more work because you need to ask yourself if you are happy with the deal you are getting – if not, it’s time to shop around.
Credit cards are a key area to look for savings. Remember there are two basic types of cards: those that have no annual fee, but offer no interest-free period, and those that charge an annual fee but do have an interest-free period. The interest charged by the former is usually cheaper than that charged by the latter.
Which is best? If you pay your account in full each month go for the one with the fee, the interest-free period and the best reward points – the rate of interest doesn’t matter, as you aren’t paying any. But if you pay only part of the balance each month choose the one with the lowest interest rate. There is no point in paying an annual fee for an interest-free period, as you aren’t getting one.
Above all, start. As John F Kennedy said, “There are risks to action. But they are far less than the long-range risks of comfortable inaction.”