Written by Glen James
Podcast host, author and former financial adviser

The start of a new year is a great time to refresh how you manage money. Here's an 8-step guide to help.

So it’s time - you’re ready to sort your money out. You are so welcome here! Whether you’re sick of feeling broke, over not having money for the things you want or freaking out over what you owe on your credit card, we’re here to help.

This process is no different to fitness and weight loss - it’s about habit and behaviour over time. There is no point wanting to take your finances to the next level unless you have a clear path, no distractions, and a system that will do the work for you. Some accountability helps, too.

Here are 8 things to keep in mind as you turn over your new financial leaf - let’s do this!

#1 do not beat yourself up

We’ve literally all made mistakes with money. Even “rich” people. In our Facebook group we’ve all shared our money woes - there’s some juicy ones! Find a way to smile about it, learn what the core problem was, and focus on being encouraged with how you’re going to move forward, not how you’ve stuffed up in the past.

#2 determine your money mindset

Money mindset is how you think about money - what it's designed for, whether you view it as a good or bad thing, what it can help you achieve. We all have a money mindset, even if we didn’t consciously design it. What has shaped your perspective on money? Maybe in your childhood money was tight, so you grew up with a scarcity mindset. Or perhaps you had a lavish money upbringing but since you’ve been out on your own, you’re struggling with overspending. Whatever has shaped it, now’s the time to reshape it to suit your life going forward.

#3 do not listen to or try to impress your broke friends

It’s no secret that many people are driving around in cars they can’t afford to impress people they don’t like. This is usually a symptom of not mastering the art of delaying pleasure, or placing too much value in what other people think. It’s important when you want to turn over a new leaf that you be strong and not listen to your friends, especially the ones who suck with money! You may also need to say no to that extra night out or that random shopping trip. Most people do not know the intimate details of your personal finances and it’s actually none of their business. Real friends will support you!

Many people will tell you that you’re not doing things right when you decide to actually get in control, only because it’s the opposite of what they are doing and what society and culture does. Be strong, say no and tell them that you’ll compare notes in a years’ time!

#4 identify and alter your habits and behaviours

Habits are the key to ultimate success - in literally every area of your life. Finances are no different. If someone arrived tomorrow and gave you more money than you thought you needed to get things under control, it wouldn’t be enough - because your habits and behaviours would remain unchanged. You’d quite likely end up back where you are now.

If you’ve ever listened to money money money you know we are a little (a lot) obsessed with the book Atomic Habits by James Clear. He explains so well how goals are achieved through building small, consistent and sustainable habits. As an example, your money will be more effective by saving a small amount each week in a separate bank account each time you’re paid, than in trying to suddenly save $500 each month without a habit. Be intentional and build the consistent habit of saving/paying X each week and over time you’ll see the results. Put in the patience work to show up daily or weekly for your finances - start a small and achievable habit you can build on. This might mean automating your debt repayments each week, or saving your first emergency fund by putting $30 into an account each week until you reach $1,000. Whatever that goal is, start small and keep it sustainable. After all, your habits are what have potentially created your financial situation now, let’s use consistent habits to unwind that.

You may also need to cut off whatever cue sends you into spendy mode - that might mean getting ahead of yourself and meal prepping work lunches every Sunday night so when lunchtime on Monday comes around, you’re not running to the cafe to spend $15. Or maybe you just default to using the credit card - cut it up so it’s not an option! Put barriers in place so your mind and body don’t go into automatic mode and continue to mess up your money.

Be prepared for the financial trade-offs to come. This is the time to make them - be strong!

#5 set up an emergency fund

An emergency fund is crucial to building a healthy money system.

Don’t go into debt because of an emergency. Likewise don’t topple your money management system because you suddenly need to find $3,000 for an unplanned pet surgery. An emergency is classed as anything you cannot plan for - a sudden cracked tooth, the car radiator dies, you brake your ankle, your pet snake needs urgent medical care. It’s not for general spending, so keep it in a separate bank account and name the account so it’s dedicated. Start by saving a $1,000 emergency fund. Then go pay off your consumer debt. Then swing back around and build up your emergency fund, aiming for 3-6 months worth of expenses (not luxuries - basic living costs).

#6 use the debt snowball on your consumer debts

Now to the dirty word - debts. First up, make an agreement with yourself to never get into consumer debt again. You now do this thing called SUBI - Save Up then Buy It. No more credit cards, no more personal loans, no more buy-now-pay-later schemes. It’s over!

The debt snowball works by listing all your consumer debts from smallest to largest. Then set up the minimum repayments required for each debt. Pay a little extra on your smallest debt and pay that one off. Once that first debt is gone, redirect those extra repayments to the next smallest debt. Do this ongoing until all debts are gone. Until these debts are gone your sole financial goal is to get rid of these debts.

After that, fatten up your emergency fund so you have 3-6 months of expenses stored up.

#7 build a money system that’s automated

So now you need a money system to manage the madness! Utilise the power of automated transfers in your online banking and get your dirty mitts off your money. Taking you out of the equation removes any potential bad habit from knocking your money over. Set up automated amounts each pay cycle to cover your essential costs, save up your emergency fund and begin paying off your debts. If it helps, delete your banking app from your phone. Get away from it, and let those regular automated payments do the work for you.

The Glen James Spending Plan is a great option to consider if setting up a system sounds completely daunting to you, or you just need someone to lay it all out for you. We get it - money stuff hurts your brain cells. Invest in a money system that works and walk away.

#8 focus on solving one thing at a time

What you’re doing is exciting! Start by making a list of things you want to achieve - even just three or four things. Prioritise them and only focus on the first thing on that list until it’s complete. It’s possibly worth putting the easy low hanging fruit goals early on the list. A sense of completion will give you the sense of progress and an emotional win, much like losing weight within the first month of a diet.

The ‘one thing at a time’ rule may slow other goals down, but remember you are trying to change your behaviour and sometimes delaying pleasure is something that will bring about long term change.

Some general goals you might consider are:

setting up an emergency fund
paying off consumer debt
cutting back on expenses
increasing income with a side hustle, changing jobs or asking for a pay rise
start meal planning to prevent buying food out
save up $X for X (insert your own amount and goal)

I have created the sound financial house (below) as a cool way to show the areas of money you may want to master, and in what order. Take it step by step.

Bonus tip: be inspired by the right people

Be careful who you listen to. Find the podcasts, books and people who encourage you to keep doing better at the pace that’s right for you. Don’t feel pressured to rush, chase the dollars and move toward something you don’t want. If you need somewhere to start, check out money money money for some infotainment, education and fun, or dig deep into Glen’s book - Sort Your Money Out & Get Invested.

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