We’ve heard from top personal finance gurus and financial experts, and with 2017 a few night’s sleep away, around the office, I hear most talk about bad debt (credit cards) and PTPTN loans. But we recognise the pattern all too well. As we usher in the new year, we’re all gung-ho and determined to keep to our resolutions and goals. Fast forward a few months, and most of us may have forgotten about our lofty aspirations.
While it’s one thing to have resolutions, we also need to make them stick! Here are our recommended resolutions and tips to help you.
6 Financial Resolutions for 2017
Review your spending habits and drop the bad ones
Bad spending habits are those that drain your money, they suck your wallet dry and you don’t really gain much value from it. They are easy to identify because they are the guilty pleasures that you know you spend money on. It could be gambling, but also as innocent as a daily Starbucks visit, or using taxi’s instead of public transportation all the time.
Get to know your financial situation like the back of your hand
No one else will do it for us, so get to know your financial situation as if it were your own hand. How much do you spend per month, what do you spend on? How much debt are you shouldering? It could also be collecting data from all your accounts and loans and calculate your net worth. You could also reduce your interest costs and complexity by consolidating your loans into a single one. Or perhaps you want to figure out what your risk appetite and investment horizon is and learn more about investing in stocks.
Commit to growing your retirement nest egg
Regardless of your age, you should be doing more than just thinking about your retirement. Set aside a small amount in a separate account each month and make sure this money is off-limits. Resist the temptation to dip into the funds to pay for that much-needed holiday. Increase your EPF contributions back to 11% if you have opted for the lower 8% in 2016. Remember, the earlier you start, the larger your nesting egg will be by the time you hit 55. You may have less to play with each month, but this small sacrifice you make will pay off in a big way when you retire – delayed gratification.
See also: Setting Retirement Goals
Create that emergency fund to keep you afloat
Although the chance of any accident or disaster happening to you is quite small, you can be pretty certain that within the next 10 years, you will experience some kind of calamity with financial ramifications. We just never know. They say they only constant in life is change, it may not always a happy change. What do you do if you’re suddenly hit by a financial shock? Can you cushion the costs? Make sure you don’t need to fall back to your parents, friends, retirement savings or the bank and build an emergency fund that can keep you afloat for at least 3 months.
Get out of debt / save more & start investing
If you have debt (outside your home loan), commit to paying it off as quickly as possible. Start with the smallest amount to create an early ‘victory’ but then focus on the debt with the highest interest rate. If you are debt free, bravo! In this case, you can try to save a little more each month. Once you have more savings than your emergency fund, consider how to make that money work for you through various investments vehicles. Diversify your investments to get the best returns for your money.
Improve your credit score
If you don’t yet know your credit score, get that checked. Having a great credit score depends on good old boring credit management over an extended period of time. Add 12 months of great credit history to your CCRIS, CTOS scores by making prompt and full payment on all your bills, credit cards, personal loans, but also utility and phone bills. Next time you are applying for a credit card, personal loan or mortgage, you will be thanking us! Your credit report is like your medical report, it’s a “health” indicator for financial providers of your financial standing.
Ways to keep your resolutions once you’ve lost a bit of steam
How best to keep yourself committed to these or other financial resolutions past February? Do 4 things:
- First, break your goals into smaller goals to ensure they look less insurmountable and easier to accomplish.
- Second, make them SMART, that is Specific, Measurable, Attainable, Realistic and Time-sensitive.
- Third, make them as public as possible, so that you lose face when you fail and create accountability in your mind.
- Fourth, create a reward (whole week guilt free Starbucks) and punishment (make a sizeable donation to a charity) to keep you incentivized to meet your goals. Make the reward and punishment also public, to ensure there is no way to get out of it.
Good luck and happy new year from all of us at CompareHero.my!