Wednesday, January 24, 2018 10:00AM / Proshare Finance
The beginning of a New Year is always a good time to reflect on the past and plan for the future. A New Year resolution list is not complete without adding a few financial goals and objectives. Resolutions are best when they are specific, realistic, achievable, and maybe a little ambitious too.
The importance of getting your financial life in order cannot be overemphasized. Here, are six specific goals you need to consider to achieve your objective:
1) Start putting aside 15% of your monthly income.
One of the most important things you need to do if you want to be financially savvy is to imbibe a savings culture. This can be done by – for a start – putting aside 15% of your gross monthly income. If you make N1.2million a year or N100,000 a month, your savings objective should be N15,000 per month.
For newbies to the world of mastering personal finances, this can be a little daunting so we recommend that you set up an automatic transfer from your salary/earning account to your savings account for this amount every month. If it is not something you have tried before and you find yourself in a fix where you need to pay some bills you can always transfer your money back, but you need to discipline yourself to live on what’s left in your salary/earning account after the automated transfer has been made.
2) Create an investment plan and follow through.
For the financially sound, investing is what follows after saving. Once a substantial sum of money has been accrued, you can now begin investing money. Investing money is the process of using money or capital in the purchase of an asset that can generate a safe and acceptable rate of return over time. A good investment is capable of making you wealthier years down the line, even in the face of the occasional economic turbulence.
Investing in mutual funds, stocks, bonds and real estate attracts a much higher interest rate than if you were to leave your money idle in a savings account. The goal is to generate multiple streams of income in order to significantly boost your financial standing.
3) Create a debt repayment plan.
Nothing weighs heavy on the shoulders like a debt that hasn’t been paid. If you’re struggling with debt and unsure of how to get out from under it, decide that 2018 is the year you are going to face this challenge squarely. List out the sum total of the debt you owe, the type of debt it is, and the interest rates that apply. This is not an easy task for most people to undertake, as it can be likened to facing your demons dead in the face.
You probably have a vague/approximate idea of just how much you owe, however listing it out will paint a clearer picture and cast a spotlight on the reality of the situation. Once you have done this, you can now work out a repayment plan. Some prefer to start with the smaller debts and work their way up while others prefer to start with the higher interest rate debts and work their way down. The goal is to use an approach that works best for you and follow through with it diligently.
4) Monitor your daily expenses.
This goes without saying, but most people are impulsive spenders. In a world ruled by capitalism where so many products are shoved overtly and subliminally in our faces, it is very easy to splurge and spend beyond one’s budget. This leaves most people with a heavily depleted account and barely enough left to sustain them till the end of the month. Most times, people wonder where all their money went to, as they cannot account for how the money was spent. This is why it is imperative to make it a habit to always monitor your daily expenses. You can make use of excel spreadsheet or simply draw up a list with a pen and paper, listing daily your purchases. This will enable you to keep track of your spending, and you will inadvertently be mindful of how you spend and make adjustments where necessary.
5) Indulge in a monthly savings challenge.
The surest way to quickly make anything a habit is to constantly do the same thing every day for a month. So assuming you have managed to save 15% every month, challenge yourself to save up to 20% the next month, 30% another month, and so on and so forth. This will help to improve your savings habit and also teach you the benefit of delayed financial gratification as you get to save more and spend less towards a specific set of objectives. If you fail to meet up with your monthly challenge, no worries, just try, try, and try again until you’ve mastered the art of meeting up with your desired monthly savings target.
6) Exercise your capacity for financial flexibility.
Plan and carry out different financial exercises for different days. You can do this by limiting yourself to a specific sum of money every day or every week as the case may be, and see how far you can survive on that amount. Nothing makes you more aware of your spending habits than having to get by on a constrained budget as you go about your day to day activities. On other days, decide that you are not going to spend any money at all, and limit yourself to just the supplies you have stocked in your home. This means you would have to cook instead of ordering takeaway, clean instead of paying someone to do it, and so on and so forth. These exercises will help you identify your spending triggers and enable you to exert greater control over them.
Adapted from FORBES