A personal finance diet

Christopher, a software engineer in Dubai, has come up with a detailed personal finance plan, which he intends to follow next year in order to build his wealth and cut down on debts.

"You can call it a personal finance diet. The intention is to cut down on unnecessary spending," he said.

So here is a peek at his advice for January 2009.

January 4: Open an automatic savings account with the bank. This will automatically deduct 10 per cent of the salary each month and lock away the savings for a certain period.

January 6: Come clean. Tell your wife about your financial woes to avoid fights, misunderstandings or grudges in the future. Do not be ashamed. You are now on the path to redemption.

January 7: It is subscription day. Analyse your expenses and find out where you can cut down. Do you need all these TV channels? Can you live with a lower Internet plan? Cancel or downgrade your subscriptions.

January 11: It is time to clear debts. Cancel your credit cards and ask the bank for a debit card instead. Enquire from the bank if you can apply for a loan to repay all your credit card debts. Make sure the interest rate for the new loan is lower than the credit card charges.

January 15: List all your big expenses for the whole year such as housing rent, car (insurance, servicing registration renewal, tyres change), holiday or travel, monthly bills, food, and groceries. Add all the expenses and increase it by 12 per cent, to cover the inflation.

January 18: Divide your expected big expenses for the whole year by 11. Let's say, the resulting amount is Dh6,000. Go to the bank and create an expense account. This will automatically deduct Dh6,000 each month from your salary.
This is where you will get money to pay for the expenses you listed on January 15.

January 25: Prepare a list of non-perishable household items/ supplies you can buy in bulk, such as soap, cleaning agents, tissue, and others. Go to the store and buy these items in bulk. Pick the house brands. They are a lot cheaper.

January 28: Go green. Beginning today, switch from paper to fabric, if possible. Use 1/3 less soap in the washing machine. Buy energy-efficient light bulbs and a multi-plug for your household appliances. Hopefully, you will save on electricity.

January 30: If you have come this far and done all the items listed above, reward yourself. Buy a nice dinner.