SMART MONEY SERIES:
While you are making your New Year resolutions to lose weight, quit smoking and promote world peace, don’t forget that all-important one that will put you on the road to financially freedom.
COME end of the year, you set yourself resolutions so that you recommit to doing things that are important to you. Then as the New Year's Eve party and fireworks launch you into the New Year, you say to yourself “What a great year this is going to be!” all geared up and keen to implement those good intentions.
As the Jan 1 holiday eases you into your plan for improvement, you're saying to yourself “I'll start those resolutions tomorrow, after all today is a public holiday”.
Ok, so it may take a while to take off, but will you still be acting on them come February? Eventually you resign yourself to just reset all over again for next year. Familiar with this scenario?
So how do you keep your resolutions? Sometimes, the goals you set are so high, you never reach them, so you slip back into your old ways. It would be much easier on yourself if you actually set realistic, reachable goals.
Get in shape, quit smoking, do charity work, promote world peace – they are all admirable resolutions, indeed. However, don't leave out an important one: Get yourself financially fit.
Resolve to set those financial goals. With written goals, your road to financial fitness will be less bumpy.
Indeed you would have heard this saying: “Failure to plan is a plan for failure”. Whether you want to take your family on a holiday, buy a house in three years, save for the haj or simply increase your savings, the important thing is that you plan.
With these goals then, you can make some solid, reachable financial resolutions for the coming year, some of which are suggested below:
Resolve to create a budget
A written monthly budget with details of cash inflow and expected outflow is highly recommended. You will be able to see where your important payments are and where unnecessary excessive spending can be cut down.
If you tabulate it monthly, you could extend it to analyse your cashflow for the year, the foundation for you to reach the goals that you wrote earlier.
Resolve to clear off credit card debts (and/or your highest-rate liabilities). First set a timeframe, e.g. six months to fully settle your outstanding balance; then set the monthly payment required to get there. If you can't fully settle the balance, you could increase your monthly repayments by a fixed amount, hence reducing the repayment tenor.
And while you’re on the clearing debt mode, you could also resolve to be a better credit card user and begin to control the amount charged on your plastic card!
Resolve to update your insurance
It is never too late (in fact, never early enough) for you to take up life insurance to protect yourself and your loved ones from unforeseen loss.
If you already have one, hats off to you for having covered a crucial aspect of financial planning. Once a year, reassess and make sure that you are protected from loss of income to your family (life insurance), medical trauma (health insurance) and damage to your most important assets (home contents, MRTA – mortgage reducing term assurance). Better safe than sorry!
Resolve to pay yourself first every month. I’m sure you know you’re supposed to contribute the maximum you can to your retirement account. The easiest way is to start small, say 10% of your monthly income, and work your way up.
Remember to do this beforepaying off your bills and expenses for the month. And for those of you who are ahead and are already doing this, consider increasing the percentage of your savings. Perhaps increase your EPF contribution from the minimum 11% to 12% to match the minimum 12% your employer is already contributing for you.
Resolve to set an emergency fund
If you’re not prepared for a rainy day, something as small as repairing your leaking roof can start a downhill spiral into debt. Ideally, you should save at least three to six months’ worth of expenses in an easy-to-access savings account, preferably a high-yielding one. This may sound like a lot of money for you to put aside but small amounts set aside monthly will get you there.
Resolve to save on your utility bills
We may only need to change our daily habits for this one. For instance, switch off the fan/air-conditioning unit/lights when you leave the room; don’t leave the water running unnecessarily (e.g. while you’re brushing your teeth); don’t have the TV switched on 24 hours even when nobody is watching; use energy-saving light bulbs (even though they are costly, they last much longer than the regular light bulbs). This resolution is a lot easier than counting calories!
Resolve to write or update your will
This is always the step that is least taken as it may bring upon morbid thoughts. However, we mere mortals know the inevitable and should plan for the benefit of those we shall leave behind.
Wills are not just for the rich; no matter how much assets and money you have, it is a financial responsibility for you to ensure that they are distributed to designated beneficiaries to avoid dispute. As for Muslims, even with the Quranic distribution (faraid), there are other factors for you to consider, for example, hibah (gifting), the one-third of your estate that you are able to distribute outside your fixed heirs. Also, if your demise should happen while your children are minors, you will be able to appoint a guardian for them.
In summary, by setting realistic goals and consistently working towards them, you can avoid being among the 25% of people who abandon their goals within the first 15 weeks of the new year.
Sources: AKPK
Related post:
Smart ways to spend your bonus
Spend smart during holidays
While you are making your New Year resolutions to lose weight, quit smoking and promote world peace, don’t forget that all-important one that will put you on the road to financially freedom.
COME end of the year, you set yourself resolutions so that you recommit to doing things that are important to you. Then as the New Year's Eve party and fireworks launch you into the New Year, you say to yourself “What a great year this is going to be!” all geared up and keen to implement those good intentions.
As the Jan 1 holiday eases you into your plan for improvement, you're saying to yourself “I'll start those resolutions tomorrow, after all today is a public holiday”.
Ok, so it may take a while to take off, but will you still be acting on them come February? Eventually you resign yourself to just reset all over again for next year. Familiar with this scenario?
So how do you keep your resolutions? Sometimes, the goals you set are so high, you never reach them, so you slip back into your old ways. It would be much easier on yourself if you actually set realistic, reachable goals.
Get in shape, quit smoking, do charity work, promote world peace – they are all admirable resolutions, indeed. However, don't leave out an important one: Get yourself financially fit.
Resolve to set those financial goals. With written goals, your road to financial fitness will be less bumpy.
Indeed you would have heard this saying: “Failure to plan is a plan for failure”. Whether you want to take your family on a holiday, buy a house in three years, save for the haj or simply increase your savings, the important thing is that you plan.
With these goals then, you can make some solid, reachable financial resolutions for the coming year, some of which are suggested below:
Resolve to create a budget
A written monthly budget with details of cash inflow and expected outflow is highly recommended. You will be able to see where your important payments are and where unnecessary excessive spending can be cut down.
If you tabulate it monthly, you could extend it to analyse your cashflow for the year, the foundation for you to reach the goals that you wrote earlier.
Resolve to clear off credit card debts (and/or your highest-rate liabilities). First set a timeframe, e.g. six months to fully settle your outstanding balance; then set the monthly payment required to get there. If you can't fully settle the balance, you could increase your monthly repayments by a fixed amount, hence reducing the repayment tenor.
And while you’re on the clearing debt mode, you could also resolve to be a better credit card user and begin to control the amount charged on your plastic card!
Resolve to update your insurance
It is never too late (in fact, never early enough) for you to take up life insurance to protect yourself and your loved ones from unforeseen loss.
If you already have one, hats off to you for having covered a crucial aspect of financial planning. Once a year, reassess and make sure that you are protected from loss of income to your family (life insurance), medical trauma (health insurance) and damage to your most important assets (home contents, MRTA – mortgage reducing term assurance). Better safe than sorry!
Resolve to pay yourself first every month. I’m sure you know you’re supposed to contribute the maximum you can to your retirement account. The easiest way is to start small, say 10% of your monthly income, and work your way up.
Remember to do this beforepaying off your bills and expenses for the month. And for those of you who are ahead and are already doing this, consider increasing the percentage of your savings. Perhaps increase your EPF contribution from the minimum 11% to 12% to match the minimum 12% your employer is already contributing for you.
Resolve to set an emergency fund
If you’re not prepared for a rainy day, something as small as repairing your leaking roof can start a downhill spiral into debt. Ideally, you should save at least three to six months’ worth of expenses in an easy-to-access savings account, preferably a high-yielding one. This may sound like a lot of money for you to put aside but small amounts set aside monthly will get you there.
Resolve to save on your utility bills
We may only need to change our daily habits for this one. For instance, switch off the fan/air-conditioning unit/lights when you leave the room; don’t leave the water running unnecessarily (e.g. while you’re brushing your teeth); don’t have the TV switched on 24 hours even when nobody is watching; use energy-saving light bulbs (even though they are costly, they last much longer than the regular light bulbs). This resolution is a lot easier than counting calories!
Resolve to write or update your will
This is always the step that is least taken as it may bring upon morbid thoughts. However, we mere mortals know the inevitable and should plan for the benefit of those we shall leave behind.
Wills are not just for the rich; no matter how much assets and money you have, it is a financial responsibility for you to ensure that they are distributed to designated beneficiaries to avoid dispute. As for Muslims, even with the Quranic distribution (faraid), there are other factors for you to consider, for example, hibah (gifting), the one-third of your estate that you are able to distribute outside your fixed heirs. Also, if your demise should happen while your children are minors, you will be able to appoint a guardian for them.
In summary, by setting realistic goals and consistently working towards them, you can avoid being among the 25% of people who abandon their goals within the first 15 weeks of the new year.
Sources: AKPK
Related post:
Smart ways to spend your bonus
Spend smart during holidays
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