14 January, 2020
Lifestyle

5 Financial Resolutions For The New Year

14 January, 2020

Introducing your New Year financial goals.

When we start a new year or a new decade, we often start with the best of intentions. This is the year we will feel in control. This is the year we will feel like an adult. This is the year that we will be our best selves. And in my opinion, all of that starts with defining clear financial resolutions.

Money-related resolutions might seem daunting at first – it can be hard to even figure out where to begin. With this in mind, I’ve done the hard work for you by listing five universal financial resolutions which you can adapt to suit your own specific aims. You’ll be on the track to financial freedom in no time!

Read more: Financial Goal Setting 101

SMART

First things first, a quick lesson in how best to achieve the resolutions you set. For every resolution, I recommend setting yourself a SMART goal. Essentially, this is a goal that is Specific, Measurable, Achievable, Realistic and Timely. Saying you want to retire at 50 is all very well, but making a plan to save a measurable amount of money every month into investments now is what will make that resolution a reality. Remember, a lot of financial planning is working out what you want to do, and then doing the maths to make sure that it works!

5 Financial Resolutions For The New Year

5 Financial Resolutions

1. This Year, I Want To Figure Out Where I Am Now

A good resolution to start with is simply to get a clear idea of where you currently stand. How much do you actually have in the bank? How much are your credit card debts? And what is your tax bill? A lot of us have vague numbers in our heads as to how much we have spent over the festive season, as well as what we should be saving. But how close are we to our goals?

The best way to determine this is with good old-fashioned pen and paper (or an Excel spreadsheet if you’re feeling fancy). Write down everything. What money is coming in and going out? What is owed to you and by you? This can seem a little scary, but it is vital to have a realistic view of your starting point. Nothing good comes from burying your head in the sand.

Once you have a clear view down in black and white, you can begin to work out how much you need to have in the bank to feel comfortable and safe. I advise my clients to have a base line of three months of expenses as a minimum emergency fund. This can change from person to person, and will depend on factors such as your personal expenses, how much you feel you can save and also your previous experience of job security.

Going forward from this, a SMART goal could be “I’m going to list my incomings and outgoings, and look back through my credit card statement to see how far off my ideal expenditure I am”.

2. This Year, I Want To Conquer My Debt

It is never a happy feeling borrowing money. Handling debt is something that is frequently down at the bottom of most people’s to-do list, especially after a busy social season!

The first step in tackling this head-on is honesty. Be clear with your debt situation. How much do you owe? What is the interest rate? What can you afford to pay back and how realistic is it?

When I first moved to Hong Kong, I got myself into some credit card debt trying to keep up with everything here. Credit card debt can be charged at up to 50% interest per year on some cards, which means that bargain you can’t resist in the January sales might cost you a hell of a lot more in the long term, especially if you take a while to pay it back. If you are in debt, then you need to examine your monthly spending and work out where you can make savings.

Going forward from this, a SMART goal could be “I’m going to make a plan that enables me to pay off $2,000 a month so that I’m totally debt-free a year from now”. Note, this may mean having to embrace JOMO (joy of missing out) for a few months until you get on track, or avoiding LKF in favour of cheaper activities – don’t worry, it’ll be worth it!

3. This Year, I Want To Protect Myself And Organise My Insurance

If something were to happen to your health, would you be financially able to support yourself? This includes medical insurance to cover you in the short term if you were to get sick and critical illness cover in case of a longer-term illness. Is this in place, and are you confident you know what it all means?

The best place to start is by emailing your HR representative to ask for a breakdown of what they cover you for. At that point, it is advisable to sit down and work out if that amount is enough. A good financial adviser can help with this.

Going forward from this, a SMART goal could be “I’m going to determine how much insurance I need by figuring out what my essential expenditure would be if I were sick”.

Read more: How Can I Protect Myself And My Family If I Get Sick?

4. This Year, I Want To Master My Investments

The New Year is a great time to review your investments and to start thinking about making some, if you haven’t already. After the tax bill is paid, you can take stock of what you have and plan some long and short-term goals.

Once you have some savings in your bank account it will enable you to survive in an emergency, and to decide what you will do with any extra money you have. The earlier you start saving, the better.

There is a lot of investment literature online – so much so that it can feel paralysing and like white noise. Start small, work out what you can afford to invest, and make sure that you are comfortable and understand the investments you are making. You work hard for your money and now it’s time for your money to work hard for you.

An investment that most people in Hong Kong ignore is their MPF. It might be that you have several accounts from previous jobs and need to consolidate them, or that you picked the funds at random and have no idea what they are doing. As such, your SMART goal going forward could be “I’m going to spend an hour this weekend organising my MPF by logging in to my online account, consolidating my pots, and making sure my fund choices make sense”. Your MPF is a good way of getting used to investments and learning how they all work. It is compulsory, so you might as well get the most out of it!

Read more: MPF 101: How To Make The Scheme Work For You

5. This Year, I Will Take Time To Review

While a lot of my suggestions involve looking forward to the next few years and what you can do to make a difference to your future, it’s also a great time to look back on what you have accomplished financially thus far. As this is more of a reflective resolution, there is no SMART goal necessary, but it’s worth considering the following questions:

  • What have you learnt?
  • What experiences (positive and negative) have you had that you can learn from?
  • What are you going to do this year to make sure that you have no regrets at the end of the year?

Read more: I’m 29 And Just Saw A Financial Advisor For The First Time

Featured image courtesy of Studio Light and Shade via Getty, image 1 courtesy of Joanna Kosinska via Unsplash.

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