Time is right to undergo a financial detox

The New Year is generally a time when many people seek a "new you" in terms of improved fitness and diet, so why not try a financial makeover, starting with better money habits and a debt detox in January?

There is little anyone can do to affect whether or not the world slips into further recession in 2012, but we can introduce steps in order to put our finances in the best possible shape and improve our chances of surviving whatever the current global economic and political landscape crisis throws at us.

Building one's wealth, in any way possible, simply gives us more options in life further down the track and this can only ever be a good thing.

Grip on reality

But before we can heal ourselves from the toxins of too much debt we need to visit the confessional and come clean with what we owe! So now is the time to get a grip on reality if you are in debt and become accountable to yourself.

Undergoing a financial detox is similar to the more common diet detox in that you rid yourself of those "money toxins" like high interest rate loans, credit and store cards, unmanageable personal loans and financial arrangements that are unhealthy to your lifestyle.

Here are some pointers to help improve your financial position immediately as you begin the path to financial freedom in 2012:

Face your credit card demons

As a generation we are carrying more credit card debt that at any time in our history. Target your most expensive credit card and pay it off the quickest, it will be far easier to tackle them one by one. Under no circumstances draw cash from your credit card at an ATM. Not only will you be charged extra by your bank but also you are spending money that you do not have! If you can't pay it off this month, what makes you think you will be able to the following month?

Resist impulse buying

There is psychological proof out there that suggests going on a shopping spree can give us a short-term high.

If this sounds familiar then one solution is to train yourself to create a list of the "must haves" and wait at least 28 days before you actually purchase the item. The theory is that your impulse should have died down by then. What have you got to lose by trying this?

Update your salary

Book a review meeting with your boss and try to communicate to them that you are worth more. If you are valued highly then you will know soon enough, however this can only happen by asking the question.

Get rid of your clutter

EBay your old clothes, CDs and the garage of junk. The money raised can go straight off the credit card with the highest interest rate. You can then use it to pay for that special thing that is on your impulse list after 28 days.

Become the discerning "tipper"

Many people are habitual tippers because they feel obliged no matter how poor the service or the food is. This 10 or 20 per cent can go straight off the card rather than on it.

Draw up a proper budget — and stick to it!

Simply list all your essential outgoings on one piece of paper and all your income on another. If your income is less than your outgoings, you already have a problem and should contact a qualified financial adviser to discuss cash flow and budgeting.

Take action from the go in 2012

The main piece of advice I can give when starting a financial detox is simply to take action! The more aspects of your finances that you can put on "autopilot", the more time there is for you to focus on the areas where timely analysis and decision-making are more likely to pay off.

The writer is senior consultant at Acuma Wealth Management. Opinion expressed here are his own and do not reflect the views of Gulf News.