BY FAZAAD BACCHUS
A very happy and prosperous New Year to my readers. Let me wish you a great 2016!
It’s just about three weeks into the New Year and as usual some of us have made resolutions, some have set goals and yet, some just allow things to happen. It’s best to set goals which are specific, measurable, achievable, relevant and time sensitive.
Today’s article is to help you keep track of your financial goals and I’m hoping you did make some.
Impulse spending – these can be some of the worst decisions when it comes to spending money. It happens without careful thinking and is usually based on emotion, either sad or happy. For this New Year try to avoid this type of spending, it’s a “good feeling buy” but doesn’t really add value to your net worth. According to Warren Buffett “if you buy things you do not need soon you will sell things that you need”.
Overuse of your credit card – remember that using a credit card is the same as borrowing, someone is lending you money! It’s an easy trap to use that card with the expectation that you will repay it with future income. Consider using your debit card if you can set aside a specific amount of money in your debit card each month and know that you cannot withdraw more than the remaining balance, this will keep your spending down. Less money will be spent and this will be better for you in the long run, “remember a penny saved is a penny earned”.
Save first, spend after- by far this is one of the most difficult to achieve. We have been taught over the years to first, list our expenses, fixed then discretionary and whatever is left over can be saved. For 2016 let’s try a different approach, that’s a save first and spend after. You can start with a small amount let’s say 5% of your gross income (the ideal is around 10%). Put it this way, if your employer reduced your salary by 5% what expenses would you drop? So imagine that were the case, set up a pre-authorized debit from your checking account every month and let the money go towards a saving account.
Track your spending – I remember many years ago my father had an old clothes hanger at the back of the bedroom door which he turned it into a hook of some sort. Its main purpose was to keep the bills stored every time he got a bill or receipt on to the hanger it would go. Today, tracking is so much more sophisticated, there are many budgeting programs that you can find online, however a simple Excel spreadsheet can do the trick. This way every month you can see how much you are spending and on what, basically where my money is going. This simple strategy will help you make adjustments where you can review and reduce either your expenses or your debts.
Work alongside a financial advisor – research has shown that more people who work with a financial advisor have more money over time than those who don’t. Sit with an advisor, discuss your financial goals, your budget your fears and concerns. A competent financial advisor will work out a proper financial plan for you that you can follow to help reduce your spending and increase your savings. This is an important decision to make in 2016. Find a good financial advisor and work your way towards creating wealth.