It's that time of year again - many Kiwis have returned from their summer holidays and are settling back into their daily routines at work. Summer activities such as Christmas/New Year celebrations, barbecues, and festivals bring joy to many, but can also take a toll on our wallets. Don't forget the "back to school" costs too if you have children.

In addition, many of us have not had proper financial education at a young age, so it's easy to fall into confusion and lose track of where all the money has gone. Reflecting on your spending habits is a crucial step in regaining control of your money.

To get back on track, consider these three key factors when reflecting on your finances this year:

1. Create a habit of budgeting

A lot of people believe that budgeting isn't fun. That it’s…ridiculous! It's like cleaning the kitchen or commuting to work…in other words, not enjoyable.

I feel you. Fun and budgeting are not two words that normally go together.

But budgeting is a necessity for financial success:

● If you want to get out of debt, you need to budget.

● If you want to save money for something (new clothes, deposit on a house, holidays etc.), you need to budget.

● If you want to reduce money arguments with your family members, you need to budget.

You need to create and maintain a budget to better control your money and reach your financial goals.

A popular and easy way of budgeting is to use the 50/30/20 rule.

This budgeting method is designed to split your after-tax income into three buckets.

Every time you get paid, you allocate:

● 50% for needs (such as food, housing costs, electricity etc)

● 30% on wants (gym, going out with friends, clothes, holidays etc) and

● 20% on savings and paying off debts (like credit cards and car finance etc).

Knowing exactly how much to spend on each category will make it easier to stick to your budget, and help keep your spending in check.

Check this link out to help you calculate your income into the three percentage buckets

2. Start an emergency fund

Emergency funds create a financial cushion that can keep you afloat in a time of need without having to rely on credit cards or high-interest loans.

If you don’t have an emergency fund, but do face an emergency, you might be tempted to go into debt to solve the situation. If you do not pay that debt off quickly, it will cost you even more as interest payments are added.

Therefore, having an emergency fund will not only save you money in the long run, it will also give you peace of mind knowing that you can deal with unexpected expenses.

If you are only starting, try to set aside a goal of at least $500, but work your way up to 3-6 months worth of expenses.

Additional tip: to stop you from being tempted to spend this money on non-emergencies, create a new bank account in a separate bank and have your emergency funds transferred to this account. This helps remove the temptation to transfer these funds into your main cheque account within seconds.

3. Invest early

At the time you start your first-full time job, investing and providing for your future may seem like something you do later in life. Then in your 30s there are usually other priorities that we focus on such as paying the rent or mortgage, or saving for holidays.

I believe it’s never too early to start investing. In fact, the earlier you start, the more you can make out of compound interest.

Compound interest is interest that is paid on both the principal and also on any interest from past years.

For example, if I receive 15% interest on my $1000 investment (principal), in my first year I would have $1,150 in my investment pool. In the second year, I would receive 15% interest on the total $1,150 in my investment pool from the previous year. Over time, compound interest will continue and wealth grows.

In New Zealand, we are fortunate to have Kiwisaver, an investment scheme that helps Kiwis prepare for home ownership and retirement. A portion of your income from your pay packet goes towards an investment pool based on your risk profile.

Check out this link to a tool on sorted.org that will help you find a Kiwisaver investment pool that best suits your current situation.

Also, investment platforms like Sharesies help people to invest in the sharemarket, something that was traditionally only for those who had plenty of money and required a share broking firm.

Check this cool article out on the Sharesies website that explains why investing is important now more than ever.

Keep swimming

Remember that during life's ups and downs, it's important to "keep swimming." This is a popular line from the movie Finding Nemo, and is a powerful mantra for any one to adopt in their lives, including with their finances.

January and February can be hectic as individuals assess their spending from the summer months. Reflection on spending habits is a necessary step in getting back on track, even though it can be a confronting process.

By following the three tips above, people can establish positive financial habits and set themselves on a path towards financial freedom.