Nine ways you can be richer by this time next year

With the excesses of Black Friday, Christmas and the Boxing Day sales now firmly in the rearview mirror, the start of a new year often signals a time for many of us to contemplate how we can make smarter financial decisions.

While some of those decisions can be major, such as getting a new job or buying a house, you can also make a raft of smaller, incremental changes that can have an impact. Here are nine promises to make yourself that will help you be financially better off this time next year.

Getting a few extra dollars in your pocket doesn’t have to involve major, life-changing decisions.Credit: Istock

1. Declare a “no-spend” year. Making a conscious decision not to spend on anything bar the necessities for an entire year can add thousands of dollars to your savings account.

Dedicating a year to resetting your spending habits is not only environmentally friendly, but it also creates more time for other things in life, such as exercise and decluttering.

You can make up rules that work for you here, but you might choose not to buy any more clothing, make-up or other non-essential items.

2. Pay yourself first. Change your thinking on salary. Rather than spending your salary first and saving what’s left over, flip this thinking and allocate your savings first.

‘On average, people can shave off around $7700 by switching their home, energy, health insurance, life insurance, car loans and credit cards.’

Kate Browne, Compare Club

Start by allocating 10 per cent of your earnings to your savings account. It’s likely you won’t even miss it. Some months, you might be able to increase that to 20 per cent. This will really start to add up by December.

Financial planner Michael Sauer urges people to establish a budget and set up an automatic transfer into a separate account on pay day to start building wealth.

“This 10 per cent should be directed into high-interest debts like credit cards or personal loans, and once that’s paid off, direct the money to a savings or offset account, your home loan or personal investments,” Sauer says.

3. Focus on your earning power. The first step to becoming richer is, unsurprisingly, to earn more. In the next 12 months, take on more responsibility, add another qualification, leverage a side hustle or take a calculated risk, financial adviser Peter Hodgson says.

“What can you do in your current role to add more value and be in a stronger position to negotiate more pay or entitlements? If you’re capped where you are, consider taking your skills and change industries to something you enjoy, or transform a hobby into an income stream,” Hodgson, the director of Walshs, says.

4. Ask for a pay rise. The start of a new calendar year is a great time to broach the prospect of a pay rise with the boss.

Research salary trends about industry standards, and schedule a meeting with your manager to discuss your salary for the year ahead. Make sure you’ve got examples of some of your key achievements over the past year, and practise your script for the meeting.

5. Switch to a better deal. What you pay for electricity, internet connection and insurance can vary significantly, depending on the supplier. Don’t pay a loyalty tax – shop around.

Make the commitment to overhaul your biggest household bills by switching to a better deal, Compare Club’s Kate Browne says.

“We calculated that on average, people can shave off around $7700 by switching their home, energy, health insurance, life insurance, car loans and credit cards. It’s easier to do than you’d think, and doesn’t take long,” Browne says.

6. Take tax time seriously. You’re entitled to claim a deduction for any expense you incurred in earning your income, so claim everything you’re entitled to. Tax expert Mark Chapman from H&R Block says if you’ve got a receipt for a work-related or business expense, claim it.

“Gather the information you need to prepare your tax returns, including invoices and receipts for work-related expenses and bank or credit statements listing expenses,” Chapman says.

“If you’re claiming any expenses that have a work-related element and a private element [such as the use of a personal mobile phone], set some time aside to work out what a reasonable apportionment is for the work-related bit. If in doubt, discuss it with your tax agent.”

What do you have lying around that you could sell?Credit: Getty Images

7. Start your investing journey. Investing in shares is one of the best ways to build wealth, with high-quality companies rising in value over time. For those starting out, read or listen to presentations freely available on fund manager websites before deciding where to invest.

You can even dip your toe in with one of the many robo-investing apps on the market, such as Spaceship, Sharesies or Raiz. Setting up automatic weekly deductions quickly adds up.

8. Top up your super. Your employer might be contributing the compulsory super guarantee of 11.5 per cent on top of your salary, but an extra $1000 a year can have a big impact on your retirement savings thanks to the wonders of compound interest.

9. Clear out the clutter. All those worldly possessions you no longer need or use can be turned into cash. Spend a weekend making a pile of what you want to sell, clean each item and take plenty of pictures before listing for sale.

Next, go through your wardrobe and pull out anything you haven’t worn in the past year. Good quality items can fetch decent money when sold in Facebook groups dedicated to that brand.

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