The new year is an opportunity for a fresh start, to set meaningful goals, create new habits and adjust your past financial spending habits to ensure a more sustainable future.
The economic conditions for 2020 look likely to be even tougher than in 2019, so it is imperative that you take a hard and objective look at your personal finances.
Achieving financial independence is an admirable goal, but very few people know where to start. Having a few good financial habits in place will help you set your new year up for success.
In order to ensure that you achieve your financial goals, you can adopt SMART goals for a financially secure future. This means setting goals that are:
In addition, it is important that you plan your finances carefully. Here are some tips to help you along:
Set your financial goals - Reflect on your financial discipline in 2019 and set new goals for 2020.
Settle your debts - Put any spare funds or bonuses and salary increases towards eliminating debt, as paying off debt quicker could save you a significant amount of interest.
Adjust your budget as needed - As you track your spending habits, make necessary adjustments to your budget, increase your savings and decrease your spending. If you receive a salary increase, allocate some to your savings rather than increasing your lifestyle spending.
Review your insurance policies – Evaluate your life, health, disability and short-term insurance to ensure that the amounts match your needs.
Freely talk with your spouse about money - There is a tendency for spouses to hide financial issues from each other. Have monthly meetings to discuss budgets, your financial goals and what you both want for the future. Take time to build a shared vision of what you want your future together to look like.
Reduce your entertainment budget - Find free activities, such as parks, libraries and things to do in your neighbourhood. There are plenty of ways to have fun without spending money.
Tips to help you stick to the plan
Sticking to your financial plan is not always easy, but aim to:
- Regularly check your bank accounts – evaluate your spending.
- Be prepared for setbacks.
- Stay clear of unplanned debt.
- Make smart purchases. Ask yourself: Do I really need this? Is this part of my financial plan?
- Meet with a financial advisor if you have no idea where to start.
*Dr Rufaro Mucheka (PhD) is a Certified Financial Planner and Head of Strategy and Rest Of Africa at Nedbank Financial Planning.