New Year’s resolution
Resolutions can be quite exhaustive, and can touch on the physical, behavioral, spiritual or life in general
IT is New Year once again: one year has passed, and another comes in. New Years always present us the time to go back to lessons learned, as well as the chance to look forward and redesign our lives. And so, New Years are popular for resolutions—a list of things that one hopes to change for the coming year, with the objective of becoming a better person.
Resolutions can be quite exhaustive, and can touch on the physical, behavioral, spiritual or life in general. But more often than not, it excludes resolutions that pertain to one’s personal finances. For the New Year, hereunder are the Top 10 New Year resolutions for personal finance in 2014 that would decisively change one’s life. The resolutions have been split into two categories: Things to Start Doing and Things to Stop Doing, for change is not just starting to do something, but also stopping some as well.
Things to start doing this 2014
Start planning—People plan painstakingly for vacations, gimmicks and family outings but actual plans—road maps, designs, or blueprint—to ensure one’s financial security is often left to the vagaries of life and “fate.” Houses are built by design; road maps are planned from one destination to another; and vacations have their itineraries and budget. Then there is no excuse not to do for one’s own financial life. How to do it? Professional financial planners can help create, design and implement a financial plan that covers all the critical areas personal finance: investments, cas- flow management, debt management, retirement, tax and estate, and children’s education. Having a sound and airtight financial plan gives more confidence and peace of mind, knowing that contingencies, future responsibilities and needs are prepared for and secured early on.
Start budgeting and monitoring—Upon closer look, expenses can generally be classified and anticipated. An Excel file can do the trick. Expense can be classified as non-discretionary (for needs such as water, electricity, phone bills, groceries, etc.) and discretionary (or wants such as eating out, fancy clothing, gadgets). Having a file that lists all expenses would enable one to monitor not just the movement of the figures over the months, but financial patterns as well, enabling the user to review and cut down on some expenses.
But monitoring can only go as far if budgeting—setting limits—are not in place. Setting up a budget for each expense item is a control mechanism that provides discipline. After which, savings can be re-allocated to more important items such as emergency fund, children’s future tuition fee, insurance or retirement fund.
Start reviewing—This is one of the least done step in a financial plan. It is like the captain of a ship periodically checking if he is still on the same route, if the ship is still intact, or if the weather is still calm. The same is true for financial plans and goals. Things do not go out perfectly as planned: market changes, life situation changes, and goals change, as well. Periodically reviewing where one is in light of the desired and required financial goals is as important as planning for it. Questions like—Am I on track of my goals? Are there changes in the market or my life situation that can affect my objectives? Should I adjust my goals—lower or higher? Is my portfolio on track with its expected returns?—are just some to consider in reviewing one’s financial plan. An annual review is recommended to stay relevant and responsive to one’s financial life needs.
Start investing in myself—One of the greatest investments a person can make is to invest in oneself. Investing in oneself means expanding one’s knowledge in personal finance, knowing the different products in the market, financial techniques and tools and how these are able to help one achieve his or her goals. Imagine if a person just knows ordinary bank products—then that same person is denied the opportunity to make his or her money grow and beat inflation to fund future needs such as retirement or children’s education!
It is very easy nowadays to educate oneself: the Internet is teeming with resources, videos and web sites on the topic. Seminars, talk and books on personal finance by experts abound these days that there is practically no reason not to know, be aware, and take charge and change one’s financial situation.
On the next part of my article, I shall be taking on the things that should be stopped doing this 2014.
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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 Rappler.
Source: http://www.businessmirror.com.ph/index.php/en/business/banking-finance/25117-new-year-s-resolution
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