New Year is frequently associated with new resolutions. Many of us, I believe, made New Year resolutions just before the year ended and/or the new one starts. In the many resolutions that we have made, a very important one would be the financial resolution. If you had financial resolutions made previously, did you achieve them? What are the chances that you will be able to achieve the financial resolutions that you made this year? One good tip is to start from the basics.
Cash Flow Planning
Firstly, sum up your monthly income and list down all your expense items. Expense items are everything including money spent on coffee, cigarettes, gifts etc. Oh, and don’t forget the upcoming vacation expenses, some spa packages and perhaps some unforeseen repair fees.
When you minus these expenses from your income, do you see a surplus or a deficit? If there is a surplus, where would the money go? Do you have any savings resolution? If the money stays in the bank, chances are it may disappear somewhere or earnvery low interest. As the saying goes, out of sight, out of mind. How about immediately putting away the surplus to other financial vehicles?
Investment vehicles would depend on your risk profile and financial goals. Fixed deposit could be a good option to start.
If it is in deficit, you may want to go through your expenses again and reduce some less important items. It may be difficult but think of how you would teach a kid to get by on their allowance? One of the ways to avoid deficits is not to use the credit card and review the expenses on a monthly basis.
Every Single Step Counts
A financial resolution can be achieved in baby steps. Say, clearing credit card debt is one of the resolutions, why not just stop using credit cards entirely? If overspending is the issue, how about refusing to sign on any spa packages?
Another idea is to use up all the toiletries and skin care before buying new ones. How about checking out any cost saving mobile package? Perhaps put your expensive hobbies as a reward after achieving some financial milestones to stay motivated?
A good financial habit determines healthy cash flow and eventually determines your financial success. Try out for a few months and realise the satisfaction that you gain from improved financial health.
Above all, having a plan to consult a licensed financial planner is always a good new year’s resolution to get started with your financial goals.