5 Tips To Achieving Your Financial Goals For 2013

The New Year is in full swing, bringing with it a clean slate and a year full of promises. So if you haven’t set your financial goals for 2013 yet, then now’s the time because setting financial goals at this point of the year can mean a very different Christmas in 2013 to the one you had in 2012.

Different people will have different financial goals for 2013. For some, clearing credit card debt is a major win, for others putting more money against the mortgage. Some will want to set aside money for a new bathroom or kitchen, others for a vacation or dream purchase. To each their own. Irrespective of what your goal is, the important thing is that you have a financial goal for 2013. Whether it’s clearing debt, increasing savings or saving for a specific goal, any goal is better than no goal. It’s cliché but true; it’s very hard to hit a target if you don’t know where to aim!

Can you imagine yourself lying on a tropical beach in Fiji next Christmas? Or relaxing at home with a glass of champagne on New Year’s Eve holding a credit card statement bearing a zero balance? How nice would that be? And if these options don’t sound good to you, what does? At this early stage of the year, it’s important to think about your immediate, medium and long term financial goals, because the actions you take today will help bring you closer to your financial goals sooner. 

Tips To Help You Set And Achieve Your Financial Goals For 2013

The first step is to choose a financial goal that’s important and realistic to you. The point here is that there’s no sense in aiming for a Ferrari if you’re having trouble making ends meet day to day. Better to set a goal that’s focused on having enough money in the bank to cover unexpected eventualities so you don’t have the stress of living pay check to pay check. So take a good hard look at your current financial state and decide on a clear, simple goal that you’d be really pleased to achieve.

After you have your clear goal, write it down. And when you’ve written it down, put it everywhere where you can see it regularly: on the fridge, behind the toilet door, in your office, taped to your bedside table or your cat, even on the sun visor of your car. Doing this keeps your goal top of mind.

Then, every time you see one of your reminder notes, take a moment to clearly visualise the outcome of your goal. Take a moment to imagine the satisfaction you’ll get having a zero credit card balance, or to imagine the sun on your skin as you laze on a Fijian beach. Feels good, doesn’t it?

Now take action every day towards your goal. It doesn’t have to be massive action, but action each and every day will keep you on track and keep your goal top of mind. Small actions, like bringing your lunch from home rather than buying it or walking to work instead of driving, will keep you goal-minded and ‘on mission’.

Most importantly, if you fall off the horse, get right back on the horse. Life throws us curve balls at times, so if your goal calls for you to save a portion of each pay check but you get an unexpected bill, or heaven forbid you splurge at a sale, don’t beat yourself up about it. Just remind yourself what the end goal is and get back to your plan.

Life happens, so when it does, simply remind yourself what the end goal is, recommit to it, taking a moment to visualise it - then get back to it!

You can achieve financial success a lot quicker with a professional team of experts around you such as a great property manager, a fabulous financial adviser, an expert solicitor or lawyer, reliable tradesmen and a for those who live in Sydney and/or Brisbane, a team of Sydney Chartered Accountants such as Azure Group at your beck and call to help you with tax deductions and depreciations!

2013 can be a year of financial success, or “same old, same old”. Whether it is or not is up to you!

Personal finance tips to help you get back on track

If you have been struggling with money or having debt problems, it can be hard to figure out how to get your personal finances back on track. Here are a few tips to get you started:

Save

If you have a bit of spare money every month, save it. Work out how much you can realistically spare and arrange for that amount to automatically go into a savings account as soon as you get paid. That way you won't miss it as much. Just make sure you don't commit yourself to anything too ambitious and unrealistic.

Don't save

Conversely, if you are still in debt, it's beneficial to pay as much towards these as possible. This is because debts usually grow faster than savings; often much faster due to the higher interest rates charged on debts. It is therefore preferable to try and get these out of the way before you think about creating savings.

Sleep on it

Getting your finances back on track essentially revolves around only spending as much as you absolutely have to. Pay for your mortgage, rent, bills, food, etc., and try to put the rest towards any debts you may owe, or into a savings account. So if you find yourself wanting to buy something you don't strictly need, sleep on it. This will help you decide whether it's really worth it.

Make a budget

Knowing how much you receive every month, and how much you spend, can help you understand and amend your spending habits. A good budget can show you where most of your money goes, and areas you can cut down on. If you don't know how to create a budget, there are many tools online that can help you. There are also bank accounts available that manage your essential and disposable income, helping you ensure you don't chip into your bill money by accident.

It can help to look out for money saving tips wherever you can to avoid getting into debt. Think Money could be a good place to start. 

Debt solutions (UK)

If you feel like your unsecured debts have got out of hand, you may want to consider a debt solution. There are many debt solutions available, such as debt management, debt consolidation, IVAs (Individual Voluntary Arrangements) and DROs (Debt Relief Orders). Facing your debt can be intimidating, but talking to a professional can help you decide what step to take next, and whether you need professional debt help or not. It's also a good way to find out the positive and negative impact this could have on you.

Debt solutions (Australia & US)

Plenty of US bloggers cite Dave Ramsay as a good place to start in terms of dealing with debts. As for Australians, you can visit the link above as a place to start learning about how to control, manage and pay down your debts.

Advice for Credit Card Debt Reduction

There are many credit card holders who have found success in finding their way out of loans. Some can find their way out by themselves and some use the help and advice from debt reduction companies, otherwise known as debt settlement firms. If you have borrowed a huge amount in the form of loans then you can find the following debt reduction advice helpful.

If you have outstanding credit card debt and are trying to find solutions on how to pay off your credit card debts, there are a few popular method and strategies to it. Sometimes it may be difficult when you're facing agressive creditors and collection agencies.

1) Snowball Method - List your debts from the lowest balance to the highest balance, pay the minimum on all your debt and divert all extra payments towards the lowest debt balance. This method is a moral booster although not the best, dollar wise. Keep repeating the strategy until your debts are paid off.

2)Avalanche Method - List your debts from the highest rate to the highest rate, pay the minimum on all your debt and divert all extra payments towards the debt that has the highest interest. Keep repeating the strategy until your debts are paid off. This is the best method that will ensure that you pay the least amount of interest over time. Although not as morale boosting as the Snowball Method.

3) Debt settlement programs - their target client are people who have debts over $10,000. An option if you're struggling with agressive creditors and lenders and just can't find your way out. They have experience negotiating with creditors for cheaper interest rates or to reduce the balance of your loan. Although there will be fees that probably apply.

4) Debt consolidation loans - Involves taking out a personal loan or organising a line of credit loan against your mortgage and using it to pay off your various creditors and lenders in one go. This enables you to refinance all the various loans into one, simple loan and usually at a lower interest rate.

5) Rolling the various loans into your mortgage via refinancing - This is always the best, however not always feasible for everyone. It's not feasible for you if you have no equity in your mortgage, if you don't have a mortgage or if your house is underwater (your mortgage balance is more than what your house is worth). If you have equity in your property, you can refinance your various loans into the mortgage and this will be amongst the cheapest form of financing. You have to ensure that if you utilise this option, you need to maintain your current payment so that you don't stretch out your debt for 25-30years. If you don't, then you'll discover that in 30 years time, you will still be paying for the dinner that you charged onto your credit card!

Negotiate with your creditors and lenders

Sort out all your bills and debts before you try any of the steps above. Call each of the creditors and see if you can arrange a payment option with them. If it's a small bill, see if you can get your creditor to reduce the bill with the condition that you can settle the bill immediately if they can assist by reducing the amount.

How you can erode your debts faster? Make extra repayments using the Snowball or the Avalanche Methods and always negotiate with your creditors. Keep them in the loop.

Understanding loans and their features

Loans can have a fixed or variable rate of interest, be secured or unsecured, negotiable interest rates and payment terms. There are many different types of loan available.

Fixed or Variable Interest
1) Fixed Interest – Interest is fixed for the duration of the loan, from the time it’s taken out to the day you pay it off.

2) Variable Interest- The rate changes either up or down depending on the market rate (which varies depending on the loan type eg: LIBOR, Bond, Central Bank rates).

Secured or Unsecured
1) Secured – Then lender can sell whatever asset you’ve secured the loan against if you default and can’t pay the loan. Assets typically used as security are houses, cars, stock portfolios and personal possessions. Loans that are usually secured are car loans, mortgages, mortgage line of credit accounts

2) Unsecured- The lender has no recourse. You’ve got not asset with the lender as a collateral. If you default on the loan, the lender considers you a bad debt and will most likely pass you along to the debt collection agency as a last resort. This loan is riskier for lenders so they usually charge a higher interest rate because of this increased risk. Examples of unsecured loans are credit cards, store cards, personal loans and personal lines of credit

The different type of loans available are:

Car Loans
Car loans are usually secured against your vehicle. They may insist on car insurance as well. You should shop around for the best financing deal first before going shopping for a car because car yards will always have their own financing but this may not be the best deal around.

Car loans are usually for a fixed amount of money, organised upfront with a fixed interest rate, repayment amount and period. Example: $10,000 car loan at 10% interest, repayable by monthly instalments for the duration of 4 years.

Credit Cards
If you can’t pay off a credit card every month before the interest free period ends, then don’t use a credit card. If you don’t listen to this wise and sagacious advice, then it will ultimately be your downfall. You only need one or at the most two credit cards ever at any period of time.

These beasts come in various structures with interest free period ranging from 0 days or 55 days to 6 months typically. Read the fine print! Understand what you are signing up for. Don’t be fooled into thinking that it’s worth spending on the credit card because you get reward points or frequent flyer points. Wow, you’ve gone and spent $3,500 so that you can collect 3500 points, the equivalent of $25-$30 in rewards – if you can't pay that $3,500 off before incurring interest charges then it's a bargain with the devil.

If you can’t pay them off by the interest free period, you will be paying through the roof with rates ranging from 11% to a more typical rate such as 18% and 28% per annum interest. Usually the banks will have a 'minimum payment' amount of around $25 or $30. The problem with paying only the minimum amount is that you will end up paying interest on the balance owing and it will take you 25-40 years to pay off the credit card at the minimum amount that they request you to pay.

I will re-iterate myself because credit cards have been at the root of marital breakdowns, stress, tears and bankruptcies – if you can’t pay them off by the interest free period, don’t use them. Otherwise, you are best off looking at other financing options such as lines of credits or personal loans which charge lower rates of interest.

Debt Consolidation Loans
Debt consolidation is a process whereby you take out a new loan (or increase an existing loan) in order to close off several smaller, separate loans. This can be done by organising a new personal loan, refinancing your mortgage and rolling those debts into your mortgage or withdrawing equity out to pay off your multiple loans.

Why do people consolidate their debts? They consolidate in order to close off the loans with a higher interest rates onto a new loan with a lower interest rate. Credit card debts may be incurring interest at anything between 9% - 38% and by consolidating and refinancing, you replace the debt with a new debt with a lower rate such as 9%. It's also sometimes done to simplify repayments, instead of multiple payments to multiple loans, you make just one single payment for that new consolidated loan.

Margin Loans
Loans that are taken out usually to buy stocks and invest in portfolios. It can also be utilised when trading CFDs. The margin loan is usually secured by your stock portfolio and they will have different loan to valuation ratios (LVR) depending on what stock you buy. The average LVR could be up to a maximum of 70-80%, this varies depending on the lending institution but the higher the LVR, the more you expose yourself to margin calls.

I'll be writing a separate article regarding margin loans due to it's complexity and how it operates.

Mortgage Loans
Mortgage loans are used to buy residential and commercial properties. It's usually for an established amount (eg $380,000) with either a variable or fixed interest rate. Your loan contract will determine the period of the loan (eg: 25 years, 30 years or 40 years) and the monthly repayment amount, which may vary depending on the interest rate charged.

I will be writing articles about how to pay your mortgage off faster, amortisation schedules and techniques to pay your mortgage off faster.

Mortgage offset and redraw facilities
A mortgage offset account works by offsetting your mortgage balance by the amount in your offset account. The interest that is charged is on the net balance amount between these two accounts. To illustrate, assume Sally's mortgage on the 1st of March is $380,000. If Sally has $100,000 in her offset account, then the bank will charge Sally interest on only $280,000.

Lending institutions will usually not approve your loan without a deposit however, they may lend anything from a maximum of 80% to 105% of the property's value depending on your income and repayment abilities. The smaller your deposit and the greater your LVR, you may have to pay lenders mortgage insurance on your loan.

A redraw facility may be a component of your mortgage, depending on whether your mortgage loan has this facility or not (check your mortgage contract). With a redraw facility, if you make any extra repayments then you can withdraw the extra repayment anytime you wish.

Again, this is a complex area and I will write a full article dedicated to mortgage loans. If you don't understand the complexity of a mortgage loan then you will not know what features of the mortgage that you will need. Also, do you really want to be spending the next 30 years of your life paying off your mortgage? Understanding the finer points will allow you to establish the appropriate loan for your circumstance and be flexible enough to cater for your repayment ability.

Overdraft
An overdraft is usually an extension of your normal account, allowing you to have a negative balance. Businesses commonly have overdraft enabled on their account to cater for cash flow imbalances throughout the year. Some individual accounts has overdraft facilities enabled, but be sure to check if you are being penalised for the usage of this facility everytime your account drops below a $0 balance.

Payday Loans
Payday loans are the biggest rort ever. This has got to be the very last resort! The moment you start using payday loans, you are probably closer to insolvency and bankruptcy than you realise. If I could say which loan to avoid at all cost, it would be this one.

Personal Loans
These loans are either secured or unsecured. If the loan is secured, the rate will usually be lower than credit card rates and loans that are unsecured. They usually have a fixed interest rate and a set amount established at the beginning of the loan. The loan will have a payment schedule with fixed repayments, normally monthly, until the loan is paid off. You cannot vary a personal loan without creating a brand new personal loan.

Commonly used for buying cars, consolidating various loans, purchasing white goods, renovation, holidays and multitude of things. Normally classified as a bad debt and not used for investing but for aiding personal spending.

Revolving Line of Credit / Line of Credit Accounts
Similar to an oversized credit card, except they are usually secured. There is an established limit such as $100,000 and you can spend from the line of credit as much and as often as you wish until you have spent your limit – which is $100,000 in this example.

Monthly payments are based only on the component that you’ve used and may vary from a certain percentage to interest only. So if you have a $100,000 line of credit (LOC) and you’ve spent $50,000 on renovation, then you will usually have to pay the interest or minimum percentage on only that $50,000 that you’ve spent. Don’t fool yourself though. You will have to pay that $50,000 principal debt eventually, so be wise and spend only what you can afford.

Store card loans and credit
This basically covers vendor financing. It's where a retail store will offer you their store credit card (eg David Jones or Macy etc). Depending on the terms and conditions, these credit varies markedly. Some whitegood stores selling furniture, for example, may offer a 'buy now, interest free for 2 years' type of deal. If you don't pay the balance off before the interest becomes applicable then they commonly back date the interest charge to the very first date that you bought the goods.

It can be a very expensive lesson to learn. Be wise and if you can't afford to pay for it today, then don't buy it.

Student Loans
These differ from country to country. I’ll only be covering Australian student loans. In Australia they’re called HELP or FSS debts. Which is Higher Education Loan Programme debts.
I'll be writing about HELP debts in depth in a separate article due to it's complexity regarding the discounts that are applicable depending on how you pay the HELP debt.



There are so many type of loans out there. Basically everything and anything could be financed nowadays by the stores or by the shops. The terms and conditions of each loan differs and repayment structures also differ. If you don't understand the loan, don't borrow until you've done your due diligence and understand what you are signing up for.