A new year is about to roll in, and while you might celebrate or not, it is a milestone that often inspire new resolutions. It is not uncommon for such resolutions, especially related to financial matters, to evaporate quickly once old habits take over and the excitement about the new beginning fades.
If the intention is to make the next year different, back those resolutions with actions that keep you on track. Here are a few suggestions to stay on the path.
No one can just pay off debt when the mood strikes ... but that is not the same as trying to consolidate and thus ensure being rid of the burden as quickly as possible. By doing so, it will be able to stop the spiral of debt from blocking future financial goals. Eliminating debt also goes some way to avoid accumulating any new ones.
Think of ways that could help with staying within one’s means and without too much of reliance on credit cards, personal loans or other additional debt.
Get financial advice
Winging it when it comes to savings – even if they are in the form of parking the funds in a savings account or certificates of deposit – is not a strategy. If in a position to set aside a sizeable amount, talk to the bank or financial adviser about the best way to get the most out of that money. Much of the financial advice probably can be acquired for free through the bank or even the employer, if it offers an employee assistance programme.
If still unsure about getting the needed help, retain a financial adviser. Paying for an hour or two of professional help can set those investments on the right track and pay off over the long term.
Budget for the unexpected
The reason a budget can be thrown out of balance is from unseen emergencies. And the solution is to set aside an effective budget for such emergencies. Having an emergency fund in the form of a savings account can be a good solution so that those funds are not within easy reach, but still easily accessible when needed.
Budgeting for emergencies is not a luxury. Look back at the past couple of years and see how emergencies may have impacted on managing finances. If you have been disciplined to plan. If not, start from scratch by setting aside enough money to tackle a few months of unemployment or a sudden illness.
Be clear about what might construe an emergency, because dipping into an emergency fund to cover expenses should not be an option.
Control expensive resolutions
New Year resolutions can be expensive. A new gym membership, a new diet, a new look, a continuing-education course or anything that is inspired by the need to start anew can be costly. While some of these can be healthy and beneficial, limit such investments until they are feasible.
For example, take a week- or a month-long gym membership instead of an entire year. Subscribe to classes that fit the schedule and start with the fewest you can enrol in. The goal is to avoid starting the year with a bunch of additional expenses that burden the best planned budgets.
Account for inflation
While planning, be aware that inflation is a big factor – even if it is just in the standard 3 per cent range. If income is not rising at the same rate, cut back on non-essential expenses to avoid debt.
Note that most inflation rates are reported for the entire country. Look closely at stats of your own area, if available. Based on the lifestyle choice, inflation can even hit hard. For example, rents don’t rise equally on all types of apartments.
There are many economic factors that determine when and why landlords see an opportunity for raising rents. So try to find what can be applied optimally and account for potential increases.
Ready for the New Year expenses
- Keep tabs on debt;
- Get financial advice;
- Budget for everything;
- Account for higher expenses.
Rania Oteify, a former Gulf News Business Features Editor, is a Seattle-based editor.