If 2025 is the year you get your money life sorted, you may be wondering where to begin. In this five-part series, money correspondent Susan Edmunds guides you through the basics.
First up: Setting a budget and goals.
Is getting your finances in order top of your New Year's resolutions?
If so, setting a budget and goals is a great place to start. They will work together as powerful tools to get you where you want to be.
Here are some things to ponder.
Goals
You might start by breaking these down to the short term and the longer term.
Short-term goals might be things like a holiday in a couple of months, while longer-term might be saving a house deposit or for your retirement.
Make sure your goals are clear and achievable, that you can tick off progress towards.
They need to be measurable so you know when you've achieved them or are closer to them. Save $50 a week, for example, rather than "save more". Celebrate your wins along the way to keep you motivated.
It helps to know why you've chosen the goals, too.
Doing something just because you think you should is a lot less motivating than doing it because it's going to improve your life or make you happier.
Liz Koh, financial coach at Enrich Retirement, said setting goals first and then thinking about making them happen is a useful "top down" approach that is more likely to result in behavioural change.
That's important because, for lots of us, it's the behavioural change that needs to happen to help us stick to a budget.
Koh recommends focusing on goals that are small steps.
"One of the biggest mistakes people make is trying to get ahead too quickly. Money is an important part of life that serves a multitude of purposes. It is not something you can do without.
"For the same reason that you can't reach your goal weight on an overnight diet or suddenly become as fit as an Olympic athlete, you can't go from being broke to being seriously wealthy in a short space of time.
"The first lesson in changing your relationship with money is to set attainable goals that reflect the reality of your current financial situation. It is better to take small steps and be successful than to set unrealistic goals and fail. Achieving small steps may give you the confidence to gradually take bigger steps. If you have never been able to save, trying saving just a small amount each week and increase the amount over time."
Budget
Your budget will be a useful tool to help you get to the goals, because it'll give you a clear picture of what's going on with your money, and what you can change.
Tom Hartmann, personal finance spokesperson at Sorted, said people either do a budget to make what they are already doing work, or to try to do something different.
Either way, it often helps to draw up a budget showing your current situation: How much is coming in, what's going on, what you're spending money on. Then you can see what can be adjusted.
You can usually get a good idea of what's been happening by looking at previous bank statements. Some banks have apps that track your spending to do this for you.
"We're creatures of routine, we keep going back to the same places, spending the same amounts, especially over a given year," Hartmann said.
"If you download your statements over a year, where you're spending money is the usual suspects."
If you want to save money, or find a surplus to start investing, you should be able to use your budget to identify areas that can be trimmed.
Sorted has a budget planner that might help, and there are also apps that can guide you.
"If you find you're spending less than you earn, which is a really good thing, you can use that budget to work out how much you can save each time you're paid and flow it to what you want, that idea of paying yourself first.," Hartmann said.
"If it's the opposite and you're spending more than you earn, living on debt or credit cards, you can use the budget to see where any extra money you might have is going and find a way to spend less or earn more."
If your budget shows money is really tight and there is no surplus to speak of, you might be able to use it to identify the pressure points and areas where change could be most effective.
Don't rewrite your budget to be overly harsh, though. If you restrict yourself too much, it can be hard to stick to.
Koh recommends people keep aside some funds for the important things - even if that's only what's most important to you.
"You will have a much more enjoyable life if your money is spent on things that really matter to you. Look at what you can cut back on without depriving yourself. Redirect spending from trivial or unimportant items to a savings account for spending on the stuff that matters. Only you can decide what is important about money to you. There is no right and wrong when it comes to choosing what you spend money on so long as you understand the consequences of your choices," Koh said.
Hartmann says a budget is a valuable tool but only part of the planning picture. "What are you going to use the tool to do? Your budget is a spending plan."
