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Failed resolutions

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February is about the time that the wheels start falling off our New Year’s resolutions. I see this first-hand every year, without fail. The swimming pool that I use on week days becomes extra busy from mid-January to mid-February. Following that, the crowd disappears and the small group of regular swimmers (including yours truly) rejoices at reclaiming “our” pool.

I have witnessed this annual phenomenon for the past nine years, which is when I first joined the city gym for a lunchtime swim. I’m told by fellow regulars - who use other facilities like the cycle room - that the same pattern of behaviour is evident elsewhere in the health club.

So why do our big plans get dashed so early in the year? Well, I believe it’s because setting goals requires behaviour change and that’s hard. It’s much easier for us to fall back into old habits and patterns than to persevere with a new behaviour.

I have also observed that people try to change too many things at once. Rome wasn’t built in a day, so don’t attempt to cure all your faults and bad habits in one year. If you want to turn over a new leaf, pick one area of change and put in place a sensible plan to achieve that goal.

When it comes to financial matters, it invariably takes time and discipline to achieve your dreams. If you want to buy a home, start a regular savings plan and stay focussed on the end goal. Similarly, if you want to avoid impulse buying, prepare a budget and stick to it.

One goal worth pursuing is to live free of credit card debt. Many Australians are reliant on plastic money to supplement their income. But credit cards provide only temporary relief. At some stage, the piper must be paid. You can’t live beyond your means forever.

Credit cards cause many people to overspend. Once you get hooked on credit, it’s hard to break the habit. Only making the minimum monthly payment is a classic credit card trap. If you can’t pay off (or significantly reduce) your credit card debt, you can’t afford your current lifestyle and may need to change your spending habits.

If you’re feeling the pinch, there are things that you can do. Take your lunch to work every day. Don’t eat out more than once a month. Save coins in a jar. Switch financial institutions. Turn off the lights. Reduce your soaring mobile phone bill. Importantly, purchase “needs” not “wants” and learn how to stretch a dollar until it screams.

You’ll enjoy the New Year more if you are free of money worries. To this end, it’s important to understand the difference between good debt and bad debt. Good debt creates wealth while bad debt detracts from your finances. It makes sense, therefore, to go into debt to buy a home as it’s an asset which invariably rises in value over time. Conversely, it’s financial suicide to finance your day-to-day living expenses using credit to fuel a continuous debt cycle.

The key to smart money management is to reduce bad debt. Typically, bad debt (credit card) carries a higher interest rate whereas good debt (home loan) attracts a much lower interest rate. Given this, a classic bad debt reduction strategy for many people is to cut up their credit cards.

While debt is a four-letter word, it’s not necessarily a profanity. Used wisely, as part of a wealth accumulation strategy, it can boost your financial position and provide economic freedom. Used recklessly, as part of a buy-now, pay-later mentality, it can literally send you bankrupt and cause economic bondage.

Paul J. Thomas, CEO


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CEO Paul Thomas