Happy New Year! It’s 2012. Isn’t it great that we’re given a new year – a clean slate to start over and correct the mistakes of the past? As they say, “New year, new life.”
If you feel that you are groping your way out of a financial mess or are simply clueless on how to start keeping your finances back in track this year, the very first thing that you should do is to assess your financial situation. Examine your bank statements for the past year and ask yourself what does it tell about you? Are you someone who jumps at every end-of-the-month sale opportunity in a department store and buys things you already have thinking you have made a good bargain? Think again.
Know what you want and how to get there. Make a personal financial statement similar to that of a company’s mission statement. Set very specific goals and concrete steps on how to go about achieving those goals.
For example, if you want to build savings of say P40,000 this year, you may opt to set aside your entire performance incentive allowance and anniversary bonus and keep them in your bank account or you may make baby steps and commit ten percent of your monthly income automatically to savings.
If your goal is to build your retirement fund in the long term, you can start by increasing your contributions to the a mutual fund and avoiding the temptation of regularly availing loan facility without any good and urgent need for it.
You can also try to learn about investing. Start educating yourself on matters of personal finance. Read a financial management book or two. Shop around for financial products that best fit your risk tolerance and objective. Keep yourself updated on trends.
Another worthy goal is to make paying off debts a top priority this year. You may prioritize paying either high-interest debts or the smallest balances first then move sequentially down the line. Wiping out your debts quickly not only helps you to steer clear of piling interest charges but also helps to protect your credit score.
In everything that you do, remember the golden rule of personal finance—spend less than you earn. Cut back spending on coffee (this may be hard for me coz I’m a coffee addict xD) and fastfood which are not only expensive but are downright unhealthy. Instead of going to the movies every weekend, grab a CD copy of a movie and enjoy watching it with the whole family in the comfort of your home. Stop spending more than you make or you’ll accumulate new debts and inevitably find yourself struggling back at square one.
Have you tried making a budget? According to an online source, a budget is like “the coaching wheels of a motorcycle that teaches you the skill and keeps you to the right path.” Simply put, a budget is fitting cash that you have to a plan versus spending it aimlessly. By invariably tracking your income and expenses, it will become natural for you to track spending leaks over time so you can better avoid them in the future.
Finally, safeguard your hard earned money by shielding yourself against identity theft. The dawn of the new age has, consequently, made this crime easier to perpetrate and harder to mitigate. However, you can always outsmart technology and the fraudsters. Always be vigilant.
With all these things in mind, you can be sure that you’re on the road to financial freedom.
I wish everyone a happy and prosperous New Year!