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My Personal Finance Resolution.

Happy New Year to you all! How was the holiday period? I hope you had enough rest. Actually, the holiday period was not supposed to be used just for junketing from one place to another only. Being the end of the year, it should be a time of soul searching and reflection. What were your expectations for last year? How many of them actually came through? What were those things you did right and what areas did you commit blunders? What were those things you did that you would have done differently? What opportunities did you have? And how well did you make use of the opportunities? Where were you at the beginning of the year and where are you now? These are the types of questions everyone should ask himself or herself.

Well, last year has passed and it has gone forever. But the impact the year had on us may leave for a long time if not forever. But let’s just say to ourselves that the past has passed. That is the only way we can forge ahead into the New Year. It may not matter whether you are reading this article at the beginning of the year or you just stumble on it now, I will suggest that you still see it relevant to you. A new year may not necessarily start by January to everybody? How do I mean? Am I trying to create another calendar? Well, if you see it that way. Let’s take a clue from the corporate world where some of us worked or are still working. You understand that some companies end their financial year December while some end their financial year in another month such as March, June or September. All of them prepare their forecasts and budgets to cover their financial year. However, you may say that you are not a corporate organization. That is true. You are at the liberty to choose your own financial year but it is always good to have it run from January to December. What happens when you are starting your plan or resolution at the middle of the year? It doesn’t matter the month you are starting with. You can still make your personal finance resolution for the year even though it doesn’t cover the whole year. The important thing is for you to have one and ensure that you implement it.

What is resolution? Dictionary definition of resolution is “a firm decision to do or not to do something”.  Why do I need to define what resolution means? I am not trying to take you back to classroom. I just want you to see that it is more than mere wishes or expression of thoughts in writing. The reason why most resolutions (whether for personal finance or otherwise) don’t go beyond the second or third month is that, it is not actually a firm decision. So, if you are not ready to make a personal finance resolution regarding that can be described as a firm decision, you may not need to read this article further. But for people that want to make a change in their personal finance in order to see the changes they desire for themselves, please let’s go ahead with the rest of the article.

Before I continue, I like to mention that resolution can cover anything. But in this article, our focus will be on personal finance. When I was about writing this article, I pondered if the topic should just be “Personal Finance Resolution”. But I thought that it will be a good idea to add “My” thereby making it to read “My Personal Finance Resolution”. This does not mean that the resolution you are about to read is my own personal finance resolution. My intention is to make every reader have that sense of ownership and responsibility. Your own personal finance resolution may not cover everything listed here. You can delete or cross out anyone that is not applicable to you. Also, because I don’t understand fully what your situation is, you are free to add to the list. At least, this will provide you a guide. So here we go!

Personal finance resolution will cover certain important areas such as income, investing, loans and credit, insurance, retirement planning etc. Therefore, I will like to categorise them as such.

Income

Almost everything about personal finance revolves around money. If you want to buy food, clothes, a car, pay for utilities or rent an apartment, you will definitely need money. That is why I am starting with income as you need to generate income in order to have those things accomplished. Even, if you are planning to buy on credit, your income will still be relevant. So, your personal finance resolution for the year will likely include plan to earn more income. But instead of you saying that you just want to earn more income, you need to focus more on those things you need to do so that you can earn more income. Therefore, your personal finance resolution will look like this:

• I will learn new skills: If wishes were horse, beggars would ride. In order for you to earn more income, you may need to improve and hone your skills. What are those skills that you need to possess in order to do the type of job that will fetch you higher income? You need to carry out your own self-assessment in order to determine your strengths and weaknesses. No employer will pay you for your weaknesses. They will only pay you for your strengths or skills that you put to use. So, if you identify the areas where you are lacking, you may need to attend courses/seminars that will help you address such deficiency. If you work in an organization where they value staff training and development, you can take advantage of this. Otherwise, it may be a thing you will do on your own. This may require that you spend few bucks but it will definitely pay off at the end of the day. Also, training may not be that expensive these days if you know what to do. There are many free resource materials on the internet. You can even watch videos that can show you step by step guide on what to do in order to achieve a specific result. Instead of reading or watching junks on the internet, you can focus on those things that can add value to you.
• I will keep fit: You may wonder and ask, “What has this got to do with personal finance?” It has a lot to do with it. Health is wealth. You need to be fit for you to earn income. That is the reason why you need to decide to live a healthy lifestyle. This will include taking care of your eating habit and engaging in regular exercise.
• I will work longer hours: If you are paid on hourly basis, you can decide to extend the number of hours that you work. This will automatically translate to higher income. For example, if you are paid $20/hour and you have been working just for 5 hours in a day. Assuming you work from Monday to Friday, this means you will earn $500 in a week or $2,000 per month. But if you decide to increase your working hours to 8 hours per day, you will be able to accumulate 40 hours in a week. This will translate to $800 per week (or $3,200 per month) instead of $2,000 per month. You can just imagine what you can do with the extra $1,200. However, your health is very important. If your health cannot support this, it is not advisable that you stress yourself too much because of money. If you develop ailment, the money may not be enough to pay the medical bills. But for healthy people, I don’t think that working for 8 hours in a day is too much. After all, that is the normal working hours for people in the corporate world.
• I will take second job: There are certain jobs that give enough free time. If you work in such place where you can easily combine another job, nothing should stop you from taking a second job. Idle hands are devil’s workshops. Ensure you engage yourself fully and productively. Don’t be idle. Instead of sleeping or watching television for long hours, you can use the time to work on another job that will not clash with your existing job
• I will start a side business: Instead of taking another job, you can actually start a side business. You may be the type that is not that keen about corporate job. You can decide to start your own side business this year. You just need to take the baby steps. Some of the large business entities you hear their names today were started as part time business. Some were started under stair case or backyard. So, it is time for you to say “No” to procrastination. A journey of a thousand miles begins with a step. Don’t be too complacent with your current job. Perhaps you started your own side business already and you are afraid about taking the plunge so that you can go full scale to concentrate fully on the business. It is time to overcome your fear. No one ever achieved greatness by playing safe.
• I will spend less than I earn: You need to understand that no amount of income will ever be enough. You need to break the Parkinson’s Law which says that, “expenditures rise to meet income”. What this mean is that, as you earn more money, your needs will increase and you end up spending more money. This describes why many people that earn fat salaries still end up poor. So, as part of your personal finance resolution, you must make a firm decision to spend less than you earn. You can achieve this by living on budget. You need to prepare a budget that will capture your income and expenses. You should also have a way of capturing all your expenses so that you can know where your money is actually going. Be disciplined enough to stick to your budget. Any expenses you can’t meet this month can be pushed to the following month. Delay is not denial. You should endeavour to buy what you need and not what you want. You have the power to dictate to your money the direction you want it to go. It is much easier to manage what you have than chasing what is outside there. A bird at hand worth much more than the two in the bush. Therefore, spend your money wisely.
• I will pay myself first: When you earn your income either by way of pay check, earnings from freelance job or income from side hustle, the first things that may likely come to your mind are your rent and utility bills. These are actually very important. But nothing is more important than you. You should learn to pay yourself first. I am not talking about the money you spend on groceries. You should see yourself as your own employee. Do you know what employers do at the end of each month? They pay their employees. Staff salary is a separate overhead to every company. In the same manner, you need to set your own salary which you will be paying yourself from your monthly income. You can use the money for the purpose of investing.

Investing

This can be seen as the continuation of where I stopped above. You may say that what you earn is not enough. Therefore, you don’t have anything left to invest. That is incorrect? Let me ask you a question. If your employer cut your salary by ten per cent, will you be able to survive it? Let me help you further. Supposing you are faced with options between being sacked as a result of company not performing very well or having your salary slashed by ten per cent, which option will you go for? There is possibility that you will gladly accept the salary reduction. So, why can’t you decide to slash your salary by putting a certain sum aside for investing? You can actually achieve this by paying yourself first as earlier explained. Here are other personal finance resolutions you can make as regard to investing.

Read Also: Investing in Stocks: Beginner’s Guide on How to Buy Stocks

• I will first invest in myself: Investing is good but you can lose everything if you don’t know how to invest your money. There is no investment that doesn’t require element of risks but the level of the risks involved may differ. The higher the risk, the higher the likely returns. So, you need to invest in yourself first so that you can understand the risks involved in different investment opportunities.
• I will read at least one article on personal finance per day: Thanks to our personal finance bloggers that create time to publish free articles on daily basis. One personal finance website may not have the capacity to publish articles on different topics every day. One place you can sure of finding article on personal finance that will interest you is Rockstar Finance. The website curates about 200 articles on personal finance every day. Also, you can find a directory of over 1,400 personal finance blogs on the website.
• I will set my investment goals: People invest for different reasons. Some invest for the future as part of their retirement planning. Some invest to pay for their children’s school fees. Some invest to raise capital to start a business. Some invest to have enough equity for their mortgage loan. Why do you want to invest? Your purpose for investing will determine the type of assets or securities to invest in. For instance, if you want to invest in stocks, there are dividends stocks and growth stocks. While a person that is already retired may be interested in dividend stocks in order to earn passive income, a young executive that plan to pay for children school fee in the future may prefer to invest in growth stocks. Therefore, you need to align your investment strategy with your investment goals.
• I will fund my emergency fund: Before you start investing, it is actually good that you set some money aside and save it in your emergency fund. This will allow you to meet emergency needs such as payment of medical bills, transportation for unplanned trip or payment of burial expenses. Having an emergency fund will prevent you from terminating your investment abruptly which can lead to loss of money.
• I will only invest in assets I understand: People may come to tell you that if you invest in a particular business or securities, you are going to get hundred per cent return within a short period. You need to be careful. If it sounds too good, it can actually be a scam. You need to determine to invest in assets that you understand. It you invest blindly, you may get your fingers burnt. That is why you need to start by investing in yourself. If what you know and understand is how to invest in stock, it will be very risky for you to take your money to invest in forex.

Insurance

People see insurance as avoidable expenses but I see it differently. I see it as a necessary investment. When you buy insurance policy, you are actually saving for the raining day. You may think that why should you buy insurance that you may not need. I want you to ask this question: What of if catastrophe strikes.  Do you have enough money to take care of the situation? Even if you have the money, which one is cheaper between paying a premium saying like $500 to secure something that worth more than $10,000? Buying insurance policy is a wise man decision. These are the related personal finance resolution you can make:

• I will insure my assets: Insurance may not cover everything but it covers many things. There are different insurance products in the market such as auto insurance, home insurance, renters insurance, motorcycle insurance and so on. There are other type of insurance such as health insurance, life insurance and travel insurance etc. If you don’t know the type of insurance that you need, you can allow an agent or broker to guide you.
• I will shop around: Insurance may not be as expensive as you think. You may just need to shop around to that you can compare quotes. This can save you money. If you bundle two or three types of insurance, you can actually enjoy some discounts.
• I will pay my premium on time: When you want to pay for insurance premium, some insurance companies will give you option of either paying monthly, quarterly, half yearly or annually. Whatever option that you choose, you need to ensure that you don’t default in payment. The rule is simple. No premium, no insurance. If you default in paying your insurance premium, your policy can be cancelled.

Credit Card

You will agree with me that we live in cashless environment. Instead of paying cash, the use of plastic cards is now the order of the day. However, cards are not the same. There are debit cards, ATM cards and credit cards. They are all means of payments. But if you want to build your credit, you will definitely need a credit card. That is why credit card is central to the health of your personal finance. In drawing up your personal finance resolution for the year, you can have the following:

• I will get a credit card: For people that think that they don’t need a credit card, you may actually need it so that you can start building your credit. You can get your first credit card this year. For youngsters that just have attained the legal age for getting a credit card, I say congratulations! But you need a guide so that you don’t make mistakes that can damage your credit. You don’t just apply for any card, you need a credit card that will suit you and your spending habits. For people that have existing credit card, you may need to promise yourself not to get another card except you really need it.

Read Also: Credit Cards Application and How to Choose the Right One

• I will keep my credit utilization low: Don’t use your card for large purchase. It is actually good that you use your card for the purpose of building your credit instead of viewing it as a source of finance. Try as much as possible to keep your credit utilization below 30%. This will improve your credit score.
• I will make full payment: If you want to control your cost, one of the areas you can achieve this is by eliminating the interest you pay on your credit card. Credit card interest is totally avoidable. If you pay your credit card balance in full and on time at the end of every month, you will not need to pay interest.
• I will not default in payment: Default is not a good thing. It tarnishes your credit report. A record of default can stay up to six years on your credit report. I believe you know the implication of this on your credit score or the way creditors/lenders will rate your creditworthiness. If you have been making late payments or you have been in default, you can turn a new leaf this year. By the time you make your card payments promptly consecutively over a period of time, the effects of the previous defaults will begin to dwindle.

Loans

If you have loans that you pay still have to pay back, you can’t claim to be financially independent. However, there may be some exceptions. For example, if you have a mortgage loan and the property involved is generating income that is more than the interest that you pay on the mortgage, this can be viewed as an investment. Your personal finance goals may include the following:

• I will pay off my debts: But for people with auto loans and other consumer loans, you need to find a way of quickly paying off the loans. There is a caution here. Some loans have prepayment penalty clause attached. The best you may do in this instance is to ensure that make your monthly payments as at when due. You can engage different strategies to pay off your debts. This includes balance transfer, debt consolidation, snowballing and so on. Depending on your strategy, you may need to pay some fee. For instance, if you have credit card debts on which you are paying high interest rate, you may decide to transfer the debt to 0 balance transfer credit card. You will not need to pay interest on the card balance during the 0% introductory APR period. But you should ensure you will be able to pay off the total card balance during this grace period. Nevertheless, you will still need to pay transfer fee.

Read Also: You Can Pay off Debt With These Strategies

• I will not take new loans: Instead of accumulating debts, it is better you find a way of increasing your income. Also, you will need to live within your means:

Please note that this list is not exhausted. Personal finance is very wide. However, with the points highlighted above, it will be easy to draw up your goals for the New Year. Once again, I wish you all a Happy New Year!

Credit Cards, Insurance, Investing, Loans