Adopt New Financial Behaviours

In this Key Learning Area we discuss some of the positive behaviours that are worthwhile adopting to bring more discipline into your day-to-day money management practices, and in planning for your financial future. 

Setting Smart Goals
Responsive Classroom (1.48 Mins)

Develop some new financial habits

To get you started, you may wish to start practicing these three financial behaviours.

  1. Keep a close eye on money going in and out.

    There are two key ways in which you can keep a close check on your inances.Firstly, it is a good idea to record actual against projected income and expenditure in your budget plan. This may require you to make adjustments to your earning and buying behaviours in order to meet your budget objectives.

    Secondly, it is important to get into the habit of checking financial balances and transaction reports on a regular basis i.e. at least weekly. You are encouraged to pay particular attention to any irregular transactions in case you are being scammed, or if you are paying for items using direct debit arrangements that you were unaware of, or no longer need e.g. subscriptions, streaming services and credit cards.

  2. Carefully manage your debt and credit use.

    Credit cards can be of great use if managed well i.e. if your expenditure does not exceed what you can afford to pay each month and therefore avoid costly interest fees. It is very easy to accumulate a lot of credit card debt, and if you are paying a high interest rate on this debt, then the amount you owe can quickly spiral out of control, making it very difficult to pay back.It is also very important that you are not paying more interest on your credit card than necessary. Many institutions charge exhorbitent rates e.g. 20% or more, while others charge 10 – 15%. If you are paying too much, it is worthwhile shopping around to get a better deal. It is always possible to switch providers.

  3. Set and work towards financial goals.

    Financial goals are money-related objectives that you want to achieve. There are two main types of goals you can achieve:

    Short-term goals: These are goals you would like to achieve within a year or less. Examples include: taking a cooking class; paying off a credit card; completing a home renovation; or going on a holiday.

    Long-term goals: These are goals that require you to sit back and look at the bigger picture i.e. your passions and purpose. These are goals that you would like to achieve in two to 50 years in the future. Examples include: starting a small business; purchasing a home and/or investment property; or having enough money to live comfortably in your retirement.Setting and achieving goals creates enormous intrinsic rewards e.g. sense of satisfaction and pride, in addition to the extrinsic awards of having your tangible needs and wants met. The first step in achieving goals however is to set them. Are you clear on what your financial goals are?

Reflection

When was the last time you checked your financial reports? Is your credit card debt out of control? Are you paying too much in interest fees on your credit card? Are you clear on what your financial goals are? If the answer to any of these questions are yes, then you may wish to start developing some new financial behaviours.

How to set SMART financial goals

A great framework to use when creating a plan for your financial goals is to ensure that they are SMART! This is an acronym that says that each of your goals should be Specific, Measurable, Attainable, Relevant and Timebound.

Specific – What do you actually want to achieve in one week, one month, six months, one year, five years, ten years?

Measurable – How will you know when you have achieved each of your goals?

Attainable – Are each of your goals realistically attainable? Goals should be challenging and require you to stretch yourself as this is motivating, but if they are too big, complex or overwhelming you will no doubt give up.

Relevant – Are each of your goals consistent with your purpose? Are they taking you to where you actually want to be, or are they someone elses goals that you have no passion or emotional investment in?

Time-Bound – You need to be very clear on when you want to achieve each of your goals by. The more detail the better i.e. the date, month and year when you want to have achieved particular goals.

An example of a short-term SMART goal is:

‘By September 1, 2024 I have saved $10,000 to fund a holiday for myself and my partner to Vietnam.’

An example of a long-term SMART goal is:

‘By the age of 65 I have $750,000 in super enabling me to draw down an allocated pension of at least $60,000 per year.’