It is hard to believe that the first month of 2022 is over.  Most people are always optimistic at the start of a new year.  They reflect on the year that ended and think about what they would like to achieve in the year ahead.  Some wish to change careers, others want to focus on pursuing a healthier lifestyle. Then of course, there is the one thing which, generally everyone wants, that is, to be in control of their finance and to be better off financially.  This can mean different things to different people. The following tips can help you on your way to achieve your vision of being in-charge of your finance.

 

1.  Set Your Goals

It is very important for you to determine what your goals are.  Clearly defined goals will motivate you to make the necessary changes required and give you something to look forward to. Set short, medium, and long-term goals.  Some common goals are paying off a debt, purchasing a car, saving for the down payment on a home, and saving for retirement. Your goals will drive the changes and strategies you employ to achieve your goals.  If you are in your twenties and wish to save for retirement, you may not need to save as aggressively as if you wish to save to pay down on a house in two years. Being passionate about your goals make it easier to stick to your plan.

 

2  Assess Your Current Situation

After setting your goals, the next step is to identify your sources and amount of income, along you’re your expenditures.

Most of us have a single source of income, our job, making it easy to know how much cash we have coming in each month.  If you are fortunate to have more than one sources of income, make a note of it, even if it is not a monthly income.  You may have a seasonable part-time job for a few months of the year, or receive an annual bonus pay out.

Identifying your expenses is not as easy as identifying your income.  Many people have a rough idea of how much they spend every month, but they don’t truly know the precise amount, or they prefer not to know.  If you are serious about taking control of your finances, you need to know how much you really spend, and what you spend your money on.

If you use a debit or credit card for your payments, it would be helpful to get a copy of your statements for the last three months.  This makes it easier for you to identify where and how you are spending your money.  Remember, it is vitality important to be true to yourself.  If you are in the habit of purchasing a coffee every day or buying a lottery ticket every week, note it down, even if the amount appears to be small to you.  When you annualize the amount of these “small purchases”, you quickly realize how much they cost.  For instance, if you spend $10 per week on lottery tickets, that is $520 per year. You can then decide if this is the best way to spend $520 of your hard-earned cash.

When making the list of your expenses, it will be useful to put them into two buckets – discretionary and non-discretionary expenses.  Discretionary expenses such as eating out twice per week, are areas where you can easily save money. Non-discretionary expenses, like your monthly rent or electricity bill, present less opportunities for cost savings.  That is not to say ways cannot be found to reduce your non- discretionary expenses, but you may not be able to eliminate them completely, as you can with discretionary expenses.

If you have current savings or investments, list them as well, what type of investments they are, and the fees associated with each investment.

 

3.  Tips to Increase Savings

To save more, you can either reduce your expenses or increase your income.  These are some things you may wish to consider:

• Get a second job or side business
• Seek a higher paying job or negotiate a pay increase when you have your next performance evaluation.
• Maximize existing opportunities. For instance, if you are participating in a work pension plan and your employer matches your contribution, ensure you are contributing the maximum the employer would match.
• Stop using your credit card if you are relying on it to meet your monthly expenses
• Find cheaper accommodation
• Stop subscriptions to things you can do without, have alternatives for, or hardly use, such as apps and cable TV.
• Cook at home, eat out less, including take your lunch to work
• Stop online shopping
• Buy what you need and not just because something is on sale
• Try to renegotiate your debt interest rate downward
• Review your savings and investments to ensure they are aligned to your goals, meet your risk tolerance, and that the rate of return and management fees are reasonable.

 

4.  Create A Doable Plan

To succeed, it is imperative you create a written plan of what you need to do to achieve your goals. I emphasize written, as this make is more real, and it is something you can refer to in the future.  Your plan should include your goals, timeline, a budget, and strategies.

Ensure your plan is realistic and something you can stick with over a long time.  Do not stop your gym membership to save money if this is really important to you.  Build in some milestones on the way to achieving you goal.  When you achieve a milestone, allow yourself to celebrate it.  This will help you stay the course.

If you falter from your plan, that is not a reason to give up.  You can either get back on your plan or make some changes, but keep at it.  Periodically, review your plan and the progress you are making. If your circumstances change, you should revise your plan according. This is your plan, your goals. You are doing it for you.

As a side note, a positive side-effect of being in control of your finance is, you tend to be less stressed and able to sleep better, which tends to lead to you being in a better mood.  So here is to your good health, financial and otherwise.

 

 

Image: Damir Spanic (Unsplash)