As we head towards the end of 2019 — can you believe another year has passed so quickly — it’s a good time to sit back and look at how your money is working for you.
How have you gone with your finances this year?
Did you achieve the savings goals you set out to achieve?
What areas do you need to improve on?
This may sound like boring homework, but nothing stresses out people more than feeling like they have lost control of their money.
It’s a big source of arguments among couples, and placing your money in the ‘too hard basket’ will only add to your stresses.
In my experience, most money problems can be solved with some reflection on what needs to change, followed by a bit of planning.
Here are some resolutions I recommend adopting to set you up for the New Year:
1. I will not spend more than I earn
It sounds pretty basic, but a lot of people fall into this trap.
It’s not that they want to spend more, but they still find themselves shocked at the end of the month to discover a whopping great credit card debt.
Or they have no real concept of their monthly expenses so even if their discretionary expenditure is moderate their monthly bills are higher than they realise.
It’s one of the reasons I’m not a huge fan of direct debit payments.
They’re convenient, of course, but it’s so easy to lose track of what you’re spending.
2. I will prepare for surprises
If there’s one thing you can be sure of when it comes to your finances, it’s that there will be surprises.
Life will be going along as per usual and then, bam, the car dies or an unexpected bill comes in.
There’s only one way to stop you from being blindsided by these ‘surprises’ and it’s to treat them as routine.
Factor in a 10 per cent buffer in your earnings to pay for these out-of-the-blue expenses so they are no longer a shock.
Just make sure you don’t dip into that 10 per cent to pay for everyday expenses or splurges.
3. I will stop spending money on things I don’t love
I am a big fan of enjoying life, but I know that this means different things to different people.
For some, it’s prioritising travel, for others it’s an expensive hobby, such as sailing or skiing.
There is absolutely nothing wrong with spending money on the things you love.
But there is something wrong with spending money on things that you don’t love.
It’s easy to spend money on eating lunch out everyday or that second cup of coffee out of routine rather than enjoyment.
So cut back on anything you don’t love, so you can spend money on what makes you happy.
4. I will set an investment strategy
Everyone needs to plan for the future no matter what your risk appetite.
This means spending no more than you earn, of course, but more than that, it also involves looking after your future financial prospects through investments
On top of managing your daily expenses, you need to consider how you’re placed for retirement.
Are you in a good super fund so you can make the most out of compound interest?
Are you building a solid investment property investment portfolio and do you have the right finance structures in place to hold on for many years to maximise the full capital gains?
Planning for the future is essential, as no one develops financial freedom by saving a little each month from their wages.
But many people do just that.
They fall back on their wage and bury their head in the sand about how they’re placed financially and what the future has in store.
But there’s a great saying that applies well to finances: monsters live in the dark.
Bring your money skeletons out of the closet, face the reality of your situation, good or bad, and you’ll be setting yourself up for a happy — and prosperous — 2019.
I hope it’s a great one for you.
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