Money Talk with Nimi: New Year Resolutions & Your Finances!Posted on Monday, January 7th, 2013 at 10:15 AM
A new year brings with it a sense of renewal and the age-old tradition of new-year resolutions helps you to focus on making positive changes in various aspects of your life. Many people make new year resolutions to exercise more regularly and maintain a healthier lifestyle, to be more prayerful, to read a book a month, to be a better mother, father, sister or friend; these are usually abandoned even before the end of January.
One resolution that is often ignored is to focus on getting your finances in order. Here are ten achievable financial resolutions to set you on the right footing for 2013. Don’t try to initiate them all at once or you will become frustrated and abandon them; just elect say three or four that you can start to address.
1. Get organised
An annual review is necessary because finances are dynamic; needs and goals change, family situations change, jobs change, incomes increase, children are born, others are off to college. Do you have a clear picture of where you stand financially? Start by gathering and organizing your paperwork: bank statements, investment certificates, insurance policies, title deeds, your will, and other financial documents.
To determine your networth, list and add up all your assets, that is, what you own including cash, mutual funds, savings and investment accounts, valuable personal possessions and the value of your home and subtract your liabilities or what you owe, such as your mortgage, car loans and other debt.
If your debts exceed your assets, do not despair; that is the purpose of the exercise. You now need to see where you can make adjustments; ideally, your net worth should be increasing each year, even if it is just by a small amount. Keeping track of your net worth on a regular basis, annually, or bi-annually is a good indicator of how effectively you are managing your money over time.
2. Set financial goals
Have you set short, medium and long-term financial goals? Your short-term financial goals will consist of what you want to accomplish in the coming year. This could include saving for a car, or a vacation, going back to school for further education. Longer-term goals include putting a down payment on a new home in three years, or planning for your retirement in 10 years. If you are getting married, or starting a family, you could start an education fund to cover school or university fees. As far as possible, involve your family in the goal setting exercise and prioritize the goals and assign them a value and a target date. Setting clear goals brings you closer to achieving them. Remember, goals should be “SMART” – Specific, measurable, achievable, realistic and time-bound.
3. Create a budget
Budgeting is one of the most important tools for financial security and to plan ahead could mean the difference between achieving financial freedom and experiencing financial failure. A good budget will help you to plan and monitor your expenses so you can identify where your money goes and where to cut back if necessary. If you don’t already have a budget, try to make one, and stick to it.
4. Educate yourself
Improve your knowledge of money matters through books, magazines, newspapers, seminars, the internet and by seeking professional advice. Whether your interest is in learning how to manage your money, how to get out of debt or how to plan for your children’s education, there is a plethora of information that will guide you and put you in control of your finances, bringing you closer to achieving your goals.
5. Be in control of your debt
Getting out of debt or at least being in control of it is another key step to taking charge of your finances. List all your debt, and prioritize; it is important to tackle the most expensive debt with the highest interest rates first. Having your debt under control gives you more freedom to do other things. It will take some sacrifice, but it is worth the effort.
6. Establish an emergency fund
Saving is key to financial success. If you don’t already have an emergency fund, think seriously about building one. Try to have at least three to six months’ worth of living expenses in a safe, accessible, interest bearing money market account. If you are suddenly faced with unexpected job loss, major car repairs, or medical expenses, you will be better prepared to cope if you have this financial cushion to fall back on.
This year, try to develop a strict habit of setting aside a minimum of ten percent of your income each month for savings or investment purposes. You will be surprised to discover that over time, even small amounts add up; automate your savings by putting a direct debit in place so that you won’t be tempted to spend every thing you earn.
7. Invest for the future
Make it a priority in 2013 to put some long term investments in place. Many stocks continue to sell well below their true value. Inspite of market volatility, continue to invest in the stockmarket if you have a long time frame; for young people this is a good opportunity. However, do pay attention to your asset allocation and ensure that you are well diversified across the primary asset classes including cash, bonds, stocks and real estate.
8. Do you have a retirement plan?
For young people talking about retirement seems ridiculous but every single year counts; indeed many financial experts suggest that you may need as much as 70 percent of your pre–retirement income to maintain your standard of living after you stop working. Most of your retirement income will have to come from the money you set aside and invest from now. If you haven’t done so already, open a retirement savings account and in addition, start to build an investment portfolio.
9. Have you made a will?
I know it sounds like a morbid way to start the New Year, but do you have a will or a living trust? Putting your last wishes down in writing should be a top priority, particularly if you have dependants. Most parents have this on a ‘to do’ list but it often gets left on the back burner. Knowing your children will be cared and provided for should anything happen to you, will give you a huge sense of relief. If you already have a will, it is a good time to review and update it to make sure you have included any recently acquired assets or new beneficiaries.
10. Give some away
Giving is a powerful and effective way to change people’s lives for the better whilst at the same time giving you financial freedom. Determine a cause or charity that you would like to be involved with and identify ways in which you can give back to the community.
Remember…it’s not all about money
Just one last bit of advice: In all these money matters, do remember that the best and most fulfilling things in life have nothing to do with money. Remember to count your blessings, not just your money! May God grant you good health, happiness, wisdom, security and peace in abundance in the year 2013 and beyond.
HAPPY NEW YEAR!
Photo Credit: ShutterStock
Nimi Akinkugbe has extensive experience in private banking and wealth management. She is passionate about encouraging financial independence and offers frank, practical insights to create a greater awareness and understanding of personal finance and wealth management issues. She is married with 3 children.Find out more via www.nimiakinkugbe.com