Conquering the costs of 2023
By Nicole Jankovic
Have you heard “failing to plan is planning to fail”? I think most of us have, but when it comes to the New Year the overwhelm of what lies ahead can leave us wondering where to start.
Being a financial “planner” my bias is to begin with the household finances… but there’s a very good reason! Once you understand your money; specifically what comes in and what goes out dollar-wise, you can control it. Importantly, the plans you have for 2023 are far more likely to be achieved.
Have you ever started a year full of aspirations only to find that you just can’t seem to make headway on actually saving for those dreams? Let’s not repeat that disappointment.
Try these steps to put your plans front and centre during 2023:
Review your last 12 months.
Make some time, get your favourite beverage and review the transactions for ALL your bank accounts for the last 12 months. You may use handy apps and online tools otherwise, if you’re like me, printed on paper works best for really absorbing what I’m reading. Grab two colours and mark EVERY expense either a ‘necessity’ (food, electricity, petrol) or ‘pleasantry’ (dining out, movies, subscriptions). Once you’re done, tally the total of each, pick your jaw up off the floor and pat yourself on the back – you’re one step closer to controlling your finances!
Reduce the cost of necessities.
Make a list of all the items you considered a necessity and take note the cost of each item. TIP: You could use an online calculator such as those available on MoneySmart to do this. Contact each service provider, ask to review your service as you feel it’s too expensive and see what happens. Think your phone/internet company, health and house insurers, mortgage providers and electricity company. Most of these very large bills can be discounted instantly just simply by asking. If not, check the plan still suits you and ask them for ways you can save.
It’s these bigger expenses that we ALWAYS pay that really eat into our ability to save for things that are enjoyable. Getting these costs down instantly improves your finances!Make it automatic
Now that you have a budget (yes, that is what you’ve just done in steps 1 and 2) you’ve identified what your NEEDS cost and now you’ve reviewed them, they cost as little as possible. Whatever the amount, divide that by the number of times you get paid and set up a regular savings plan by making sure that amount goes to a separate “Bills” account each time you’re paid. That way, you will ALWAYS have the cost of your necessities covered.
If your needs cost $50,000 per year and you get paid monthly, you need to make sure that you transfer $4,167 to your bills account each pay. $4,167 x 12 = $50,0004.Prioritise your pleasantries
With any remaining income, you can now plan for the pleasantries. Going through your statements take note of expenses that REALLY add something to your life. A beloved coffee with friends once a month – great! A subscription to a magazine that you rarely get to read… maybe not. Keep some and cull others. Now add the kept items to your budget noting the cost of each item and add the total. Whatever that is; divide by the amount you’re paid and… you guessed it – set up an automatic transfer of that figure to a “Lifestyle” account just like we did for the bills.
If you find that you have no pleasantries and are barely able to keep up with your necessities, consider reaching out to a Financial Counsellor; trained in assisting everyday people who struggle financially.Planning for new adventures in 2023
Whatever you’ve culled so far leaves you with either more income left over each pay OR allows you to be less in debt each pay. Either way – you’re now in control.
If you have income left – Plan some of those sought after experiences/priorities. Find out what they cost, break it down into how many pays between now and when you must pay for it and assign your pay accordingly. If there’s not enough income to pay for the experience consider delaying it OR change the goal enough so that what you do have will cover the cost.
f you don’t have any income left – Consider very carefully anything on your pleasantry list. Do you need it to maintain a reasonable standard of living? If yes, try to find ways to have it cost less. If you’re an avid reader, perhaps you could use your local library rather than buying books? If you can’t go without the monthly movie night with friends – could you do that at home with them instead and make your own popcorn?
Whatever you find yourself planning for in 2023, starting with your household finances empowers you to know what you must work with. May the year bring you many great things – including much needed savings on those household bills!
“The way to get started is to quit talking and begin doing.”
—Walt Disney