Making an early New Year's wish

A friend told me she has decided to make her 2007 financial resolutions a little bit early this year. The reason? The Dubai Shopping Festival will start later this month.

Since she didn't miss the Dubai Summer Surprises, the Ramadan discounts or Gitex's electronic shopping, she thought it might be wise to resort to damage-control before the New Year.

While I think a firm decision to deprive oneself of shopping during one of Dubai's most attractive events is a bit harsh, I agree that a little planning and a frequent review of one's financial standing may be useful to detect symptoms of indebtedness before they grow into chronic problems.

If the year-end provides such an opportunity, it can't hurt to make the best of it.

People wonder why their yearly resolutions to save, or to earn extra money, for example, rarely survive longer than New Year fireworks.

My opinion is that if we are promising ourselves a lot in the future only to feel better about the previous year, we are setting ourselves up for failure.

Once the celebration and the time for reflection are over, our resolutions will be easily forgotten because we haven't planned any real actions to ensure they remain on top of our list of priorities.

Looking forward

But before you sink into depression, let's ask the question:

How can you make this year's resolutions any stronger or more sustainable than last year's?

The key point to understand is that it's hard work. So don't waste your time unless you're willing to invest some effort and sacrifice some careless spending.

If you go for this exercise, start by getting equipped. A note pad and a calculator, an Excel sheet or money-management software can be useful for keeping track of your cash flow, income and spending.

The starting point for forward planning is to have a look at your past expenses. Go through your last six months' bank statements, and try to come up with some conclusions.

If you find that you could hardly make ends meet in the last year, it may be unfair to pressure yourself into a tighter lifestyle.

But if you spot sizeable amounts here and there that could have been better allocated, you may flag them to calculate the funds at your disposal for new ventures.

Then comes the time to make your wish list. While there is no way to guess what will go onto people's lists, there are common factors among all of them: you are planning to earn more money or manage your money in a more sensible way to be able to acquire more assets or pay off debts.

Realistic goals

So whatever goes on your list – be it becoming a millionaire or going on a world trip – try to keep it within your reach.

For example, if your goal is to pay off or settle a personal loan or a car loan early, find out how much this would cost you per month. Figure out how you can cut your general expenses to allow such a saving by refering to your notes from your credit cards, your income and cash flow.

Make sure you do not slash your leisure and entertainment budget as a waste of money. The more balanced your budget is, the better chance that you will be able to commit to it. So you don't have to be too harsh on yourself.

Once you've reached a viable target sum for your potential savings, take a more serious step. Open a new bank account, and ask the bank to automatically transfer that amount to it.

Specify that you don't want to receive an ATM card for that account, so that you maintain some distance from the saved money and make sure that it remains your last resort if you're looking for an extra splash of money.
Will this work? I cannot claim to have an answer for this one, but what I understand is that as in any area of life, you need to be strong-willed to achieve a positive change in your spending habits.