Have you made your new year’s resolution last year? You probably did, like many. But did you make any resolution that concerns finances?
Many Filipinos make new year’s resolution, hoping their year will be much better than the previous one. But only a few sticks to it like a real relationship. So, why bother considering your finances, too?
There are proven ways to actually commit to your New Year’s Resolution like making a dream board of it, cut down from your lifetime goals. These long-term goals will determine the best new year’s resolution for you. (Read more: Personal Goal Setting)
New Year’s resolution in improving your financial health, however, could be the ones that you may actually keep even without a visual aid. It’s hard to picture these anyway. In other words, with very less effort.
Here are the financial changes you can do on a yearly basis:
- Know Your Net Worth
- Update Your Goals
- Debt Management Planning
- Review your Investment(s) and Insurance(s)
- Grow Your Income
- Expand Your Portfolio
- Assess Your Retirement Plan
Know Your Net Worth
Calculating your net worth is crucial to evaluate your financial health in order to reach your financial goals.
Monitoring your assets and liabilities will help you to assess if there are mistakes in your finances as early as possible.
There are many tools online to help you in calculating your net worth, including this blog’s version.
Update Your Goals
Every goal requires a certain amount of money, one way or another. But if you are a typical spender, it will be less likely to attain your goals easily or in a shorter span of time.
To avoid yourself from the temptation of spending too much, put your goals some monetary value and allocate a separate account for it. Make automatic deductions if your income goals directly to your bank account, whenever possible. This does not only saves you from the hassle, but will also avoid you from spending the amount you should be saving for your goals.
Debt Management Planning
A savings plan you have may not work if you do not plan on settling your debts or loans. Take it from me, I experienced that.
Assess your net worth how much you can spare for paying off the loans you have. Cut down your expenses so you can pay down your debts little by little but on a regular basis.
If you owe in your credit card, do not add up purchases using it. Pay it off first.
Review Your Investments and Insurances
Make it a habit to annually review your investments and all types of insurances to know if you have to change anything.
Checking your investment portfolio will make sure you keep up with the market fluctuations. Some sectors may over-perform and some may under-perform. It is best to rebalance your portfolio by updating your assets allocation. If you have a fund manager, you can ask for a report on this, if he’s not doing it yet.
Review your insurances if anything is expiring, especially your auto and/or health insurances. Term insurances needs to be renewed on an annual basis.
Life and disability insurances should be reviewed also even if it is not a yearly renewable plan. Check if you still have the coverage you need.
Grow Your Income
Your income shouldn’t be confined to your monthly salary especially if your net worth is negative. Get a side hustle!
A side hustle is like a part-time job you do aside from your regular work. Many Filipinos do this and it is worth considering to achieve goals faster.
Consider a side hustle that you love doing like baking, graphic designing, or teaching kids.
Expand Your Portfolio
Now that you know where your money is going, and having enough cash flow, it is time to invest more.
Expanding your portfolio means you have to diversify your investments to lessen the risks of loss and for insulating it against the volatility in the market.
If you are focussed in one asset class, you might lose a lot. I’ve seen a lot of (virtually) crying short-term investors on a certain Facebook group who invested all their money on infrastructure because of the Build Build Build Program of the current administration. If I did the same, I’ll be crying, too. But since it is a common investing mistake, I avoided it. And because you are reading this, you can avoid it, too.
Assess Your Retirement Plan
You probably have a retirement plan through the Social Security System (SSS) or Government Service Insurance System (GSIS) and a company retirement plan sponsored by your employer.
Although those above are cheap, it is still advisable to get a separate retirement plan that will save you in case you leave your company for whatever reason or to add to your fixed monthly pension.
It is important to consider the increasing inflation rate. Because the money decreases its purchasing power as years go by. Consider it in your financial plan and start as early as possible.
To your best year ever,