We all know what it is like to work towards a goal. It takes effort and dedication to faithfully apply yourself as needed. When it comes to money and money management, many of us, and women in particular, see them as intimidating. However, money is a necessity in modern life, and should be managed. All too often, it is easy to get overwhelmed when trying to get a handle on your finances. Typically, panic sets in, and you are prepared to kick the can a bit further down the road. However, it does not have to be that way.

For 2022, we are recommending the following five goals, which are critical elements in any money management exercise. They all do not need to be tackled at the same time, but preferably, you should aim to embark upon the first four.

 

1.  Determine Your Financial Goals

As the very first step, and to set the foundation for what is to come for the rest of the year, it is crucial to set some financial goals. What would you like to accomplish financially in 2022? A myriad of goals could be considered based on your own unique circumstances. However, and although you may have a long list of goals, it is recommended that a shortlist of between three and five be selected.

Once you have identified your financial goals for the year, spend some time figuring out what you will need to do to achieve each of them. Thereafter, and to take it further, create some smaller, self-contained goals that could help you move closer to the larger goals you have set. Achieving these smaller goals are likely to keep you motivated, and more likely to achieve the financial goals you have set for the year.

 

2.  Create A Monthly Budget

All too often, and although we are aware, we may not always fully appreciate how our expenses change from year to year. For example, and since the pandemic, goods have become a bit more expensive due to increased production and logistics-related costs. Furthermore, some countries have experienced currency devaluations, which again has affected the spending power for citizens in-country. So although we might have realised that our expenses have been increasing, or that $100 does not buy as much as it used to, we may not have sat down to study the implications to our finances.

Creating a monthly budget is an excellent exercise through which to understand how and where your money is going. More importantly, it also allows you to examine and consider whether or not, or the extent to which, you and/or your household, among other things:

• Are adequately covering the priority expenses;
• Can truly afford the life and lifestyle you are living; and
• Have made adequate provision for the future, such as through saving and investing.

Once your budget is completed, use it to guide your monthly spending habits. It is emphasised that there may be a disparity between: what your expenses are; how you in fact spend; and the budget you have developed. Ideally, you should be following your budget, which should balance your income, expenses, along with what you wish to save and/or invest.

 

3.  Set Up Or Replenish Your Emergency Fund

An emergency fund, which is also known as a contingency fund, is something that we may never consider until we find ourselves in a financial bind and need it. Separate and apart from your savings, an emergency fund tends to serve as a financial safety net to cushion you – and your overall financial health – should unexpected expenses occur.

Typically, when there is a financial emergency, the first option is either to use your credit cards (for expenses you really cannot afford), or to secure loans, which essentially puts you further into debt, from which it could be a challenge to recover. In having a contingency fund, which could be used should there be job loss, a medical emergency, vehicle difficulties or unplanned travel expenses, to name a few, it provides money to cover those unplanned expenses.

When setting up an emergency fund, consider your financial or economic situation. Ideally, the fund should cover at least six months’ worth of your basic expenses, which would include rent/mortgage, food, utilities, etc. In the event you are creating an emergency fund for the first time, do include it as a line item in your monthly budget. It is recommended that you set up a separate account to save your emergency fund money, and have it deposited via automatic debit or a standing order from your main accounts, so that you cannot talk yourself out of saving those funds. More importantly, and whenever you draw down from your emergency fund account, it should be a priority to replenish it, so that it is available for another unforeseen rainy day.

 

4.  Develop Or Revisit Your Retirement Plan

So many of us think that we will have time in the future to get our retirement in order, but the truth is that the younger you begin to address it, and thereafter, keep it top of mind, the better. If we are lucky, some of us end up working for organisations that offer pension plans as part of their employment package.  However, in many instances, we are not paying attention to the terms of the plan, such as the age at which a pension can be drawn, as well as the amount that will be received.

In many countries, the pensionable age, that is the age at which you become eligible to collect your pension or retirement benefits, has been increasing, as life expectancy also increases. Hence, current and future generations of workers may need to be prepared to work longer (more years) before their pensions kick in. If instead, there is need to take early retirement, there will be a gap between when your final salary cheque and your pension cheque is received, which you will be responsible for.

Additionally, as cost of living increases, currency fluctuate and devalue, and our living expenses increase over time, it is likely that the pension we will receive will not be enough to keep us in the lifestyle to which we have become accustomed. The contribution that both you and/or your employer are making to your pension plan may only cover a fraction of your expenses when you retire. How do you try to manage this situation? You create a retirement plan.

In developing a retirement plan, here are some key questions to ask yourself:

• At what age do I plan to retire?
• How much a month will I need for my expenses?
• For how long will my retirement funds need to last me?
• How much a month do I plan to save towards my retirement?

Once you have a sense of your retirement goals, assess when you currently are. Are you on track to achieve those goals? If you are not on track, what do you need to do to reach them?

 

5.  Start A Side Hustle

To varying degrees, the pandemic has been and continues to be a time of uncertainty. Although some expenses have declined, such as petrol, if you are working from home, food and utilities may have increased because the entire family is home for extended periods of time. Further and setting your financial goals, developing a monthly budget, setting up an emergency fund, along with ensuring that your retirement plan is on track, you may realise that there just isn’t enough money to go around.

An option that should bring in some additional income is a side job or gig. These days, there are several online freelancing platforms that could be explored, and depending on where you live, there might be local or regional sites as well. Depending on the platform and the nature of the work that needs to be done, there may be considerable flexibility in when the work is actually done – provided it is delivered by the agreed deadline date.

There is also the option to secure projects through your network. It is strongly advised that you do not offer your services to your employer’s clients, or potential clients that are within your employer’s catchment area, on the side. Such activities could be seen as undermining or stealing from your employer, and could lead to job loss! Ideally, your side hustle could be based on skills that you do not use for your employer’s work, For example, if you work in a corporate setting, sewing, flower arranging, being a personal trainer, caterer, etc., could be options. Alternatively, your side hustle could have you apply your skills and expertise in a way that is outside the scope of your employment. So, if you are an accounts officer dealing solely with the day-to-day transactions of your employer, a possible side hustle could be preparing tax returns for individuals, or helping a small business with their bookkeeping needs.

 

Final thoughts

In summary, these five goals are an excellent start to 2022 and beyond. However, it is critical to be proactive where your finances and financial health are concerned, and to be conscientious as you prepare for your future.

 

 

Image: Marco Verch Professional Photographer (flickr)