New Year’s Resolution – Part 2
The first part of the article last week gave five simple new year’s resolutions that will decisively change one’s financial life. On this second and last part, the remaining five are given:
Things to stop doing in 2019:
- Stop Irresponsible Purchases – This includes buying on impulse, buying out of budget or worse, buying without a need. Responsible purchases, on the other hand, means that all expenses are: 1) programmed, anticipated and expected, 2) done to contribute to financial goals and, 3) undertaken but examined for its financial impact. This does not mean Spartan living for all of us: travels, vacations, buying gadgets, and other wants can be had but actual purchases should not derail future needs. Sure, that gadget or dream get-away feels good but having no insurance and no emergency fund intact at the same time is a recipe for serious financial problems. Separating needs from wants is key in responsible buying. Ask yourself: Do I really need this? Does this increase in value over time? How will this contribute to achieving my financial goals and objectives?
- Stop Irresponsible Credit – Credit cards per se are not bad. You can enjoy freebies, perks and benefits by using them. Yet buying on credit with unpaid credit balances mounting is suicidal. Some credit cards nowadays can charge up to three percent per month or 36 percent per year. Being buried in debt is a very harrowing experience and will greatly undermine your financial future—where resources that could have been reallocated to actual needs are just thrown away for charges and unnecessary expenses. One rule of thumb when to use credit card: buy only when you have the actual cash at your bank account.
- Stop Procrastinating – I have done retirement planning seminars in various companies and institutions, it is not uncommon that I hear sentiments like “I wish I could have done that earlier…” or “I wish I could have invested earlier…” Time is one of the most precious resources and a delay of one day, one week, or one year can spell the difference between added financial security or less. For example: we all know that death comes unexpectedly, and what if the next day is the day of “reckoning”? Putting off a purchase of insurance for a day, for example, can mean additional financial burden for your family when that happens or worse, leave them with nothing at all.Moreover, procrastinating investing in later years or “when I can afford it” erodes one chance of getting more returns moving forward. With pooled funds like the Unit Invested Trust Fund (UITF) and mutual funds in the market, one can invest for as little as P1,000 already!
- Stop Being a Victim of Consumerism — The latest fad, fashion, and gadget, and get-aways will always be there. And they are all cash going out from you. Chasing the latest trend every time, all the time is a drain in the pocket—unless you have a very huge surplus and can afford to buy them always. But more often than not, these are things that decline in value over time or, in the case of travel places, they would just stay there for at least the next couple of years. Key here is knowing your priorities. True, the decision to make is always this: do I sacrifice today for tomorrow, or do I sacrifice tomorrow for today? Your priorities and how much you are willing to trade off present and future consumption will largely determine your financial future.
- Stop Living Outside Your Means — “Deny!” as Suze Orman, a personal finance guru, would so emphatically say for purchases not within her client’s means. It’s just simple: if you cannot afford it, you cannot afford it so don’t buy it–for now. The Filipino saying could not have said it any better: “Habang maikli ang kumot, matutong mamaluktot.” So, as Robert Kiyosaki says, ‘increase your means’—work hard for it, save up for it, invest for it, and enjoy it in the future.
At the end of the day, personal finance is about discipline, behavior, willpower and knowledge in managing one’s finances. Of course, there are professional and expert financial planners out there who can objectively help people shore up their personal finances and secure their and their family’s financial future.
A happy and prosperous New Year to everyone!
Rienzie Biolena is a Registered Financial Planner of RFP Philippines. He is a Senior Financial Advisor at asset management company, and Columnist of Business Mirror and Manila Times.
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