MANILA, Philippines - It’s the time of the year when new year’s resolutions are made. Often, these have to do with improving one’s health and wellness. When thinking of these, why not try to include resolutions that will make you money smarter?
After all, being of sound financial standing could contribute enormously to both your mental and emotional well-being.
Since sound financial health results from good planning and discipline, it pays to have a few resolutions that can guide your decision making process in the months ahead. But as with all start-of-the-year promises, remember that resolutions only work if you keep them. Here are some seven suggestions on what you can look at to improve your financial health in the year ahead.
1. Set money goals.
Now’s a good time to set short-term, medium-term, and long-term money goals for you and for your family. Short-term goals would cover anything you’d like to do in the next 3 to 12months —possibly a gadget you’d like to buy, or a vacation you’d like to take.
Medium term would cover those plans you intend to do in the next five years — maybe purchase a car, or perhaps go back to school. Long-term plans would include a much longer horizon — say a comfortable retirement, or a vacation home.
List these down, plus timing when you would like to achieve them and how much you think they’ll cost. Knowing what you want is the first thing you need to be able to plan well.
2. Keep money records.
Gather records pertaining to your finances — your bank accounts, investments, credit card bills, tax filings, pay slips, to name a few. This will give you a better idea about your financial standing, and may provide you additional insight on your income, cash flow, and investment needs. Keep a record of these important documents. Many find this to be tedious and leave it for later, but later can be now and start you on the road to a better understanding of your money.
3. Have a budget.
Come up with a realistic budget that you can stick to. In creating one, make sure you look at all aspects of your life that you spend on. You may also wish to think of how your typical work day unfolds to identify the moments when you have to spend. For instance, on your way to work, you need to pay for gasoline or transportation. Once you get to the office, you need to buy breakfast.
Your updated records would provide important information you need in coming up with a realistic budget. Note that this budget is not only a tool that would help you manage your expenses and project your cash needs, but it could also help you achieve your financial goals in the long run.
4. Cut expenses.
Based on your budget and your updated records, you may be able to identify what you are spending a lot of money on. Look at those areas where you can cut expenses.
Could you have spent so much on gasoline because you are using a gas guzzler? Have you spent so much on car repairs because your 20-year old car is constantly breaking down? Are you spending way too much on food because you are getting your snacks and groceries from the 24-hour convenience store?
Of course, you may also have to do some cuts if you discover that you have spent way too much on something. For instance, do you really need to visit the coffee shop two times a day? Do you buy dresses weekly only to hoard them in your closet? Take a hard look at your life to know where you can make the cuts.
5. Save.
Pay yourself first whenever you receive your salary or earn a bonus. Do this before you spend on your other necessities. This way, savings becomes a basic need as well.
Most people prefer to pay off all their bills and buy the things they “need” before setting aside money for a rainy day. More often than not, they find there is nothing left over. But if you start the discipline of setting aside for your savings fund before settling all other expenses, you’ll find you have better chances of increasing your savings pot.
6. Invest.
Once you’ve built up a healthy savings fund, time to consider investing to make your money work harder for you. Whether it is for capital preservation or to grow your wealth, there are various investment funds and vehicles that may be worth looking at, depending on your individual needs. Consult a financial professional to better understand what will be best for your needs.
7. Live within your means.
There is nothing wrong with occasionally splurging on the finer things in life. You do have to reward yourself every so often However, it is necessary to know how much you can afford to spend on non-essential items.
People’s definitions of non-essential items would vary but they could very well include all expenses that you do not necessarily need, but simply want. Try to keep non-essential purchases up to a certain percentage of your income. This way, you can enjoy some things you’ve always wanted without necessarily busting your budget.
source: www.abs-cbnnews.com
