Whenever a calendar year is about to end, the dawn of a new year offers fresh hope and renewed optimism. Almost everyone shares the belief that life will change for the better, especially in the financial scheme of things. The desire is to have an all-year-long, stress-free, and stable financial situation.
For countless individuals, money concern is not seasonal but an everyday affair. The common wish for 2018 is to be relieved from a cash-strapped and debt-ridden position. Thus, the New Year is perhaps the best time to take action and seek a reversal of fortune.
Review your financial year
Review the passing year objectively in terms of your financial stress. Was the year tough that you barely coped with the increasing cost of living and was dislocated by expenses? That situation is prevalent to many yet some are able to achieve a semblance of financial security despite their circumstance.
One positive approach to start 2018 on solid footing is to prepare a financial checklist. It does not mean that you create magic and pull a rabbit of the hat. The essence of a checklist is to have a guide, money-wise, to have a stress-free year.
Your Financial Checklist for 2018
1. Assess your actual financial situation
The first item in your checklist should be the net income you are receiving. Account for all the basic and recurring living expenses every month without leaving out any. Deduct the sum total of the expenses from your net income to arrive at the available cash, which is the starting point where you set limitations for spending.
2. Prioritise debt repayment
When you know your actual working fund, you need to ‘prioritise’ debt repayment. It makes a lot of sense to list down all outstanding loans, including credit card balances. If paying off the balance is impossible, ensure regular, prompt payments to save on interest cost and penalties.
It is important to pay your debt on time to avoid being “blacklist” and not having to access to credit because of poor payment habits.
3. Monitor your spending
With money properly allocated for the payment of expenses and debts, begin tracking down expenses even if it means accounting for every penny. If you can limit your spending on necessities and forego of the non-essentials, you’ll have enough dollar to save for future gain. You can try using the BNM MyTabung App to start tracking your spending in the new year so that is within the budget you set.
4. Set aside money for savings & investment
If you are successful in taking the bull by the horns, start setting aside money for savings in your checklist. Allocating even a limited amount will not enrich you instantly but it will be of value in the months ahead. When compounded, the money you stash away today can be your seed money for a future business or investment activity.
Having a lower-income should not be a deterrent to financial success. The vibrant economy of Malaysia offers other income opportunities. You can increase your modest take-home pay by taking on part-time or freelance jobs just to ensure there’s money for savings.
5. Build up your emergency fund
Another crucial item to include is a modest provision for an emergency fund. Separate this amount from your savings goal. It’s an entirely different entry in your financial checklist.
If savings is a short-term goal, an emergency fund is a long-term financial goal. This emergency fund is there to help you when something unexpected happen to you or your family. The amount may not be worth much in the present but will form a huge part of your safety net in your overall financial plan.
6. Plan ahead when securing loans
While you have set debt repayment as a priority item, taking control of debt is the more formidable task. There’s no advantage when you’re reducing your loan balances only to replace them with fresh borrowings. You’re not improving your situation at all with this scenario.
Plan and schedule your borrowings from here on. That includes the responsible use of your credit cards and getting personal loans only on things that really matter.
7. Check your progress
Be your own compliance officer and check your progress on the items listed in the financial checklist every month end. If you are not someone discipline, get your spouse or your close friend to help you to track progress with you. Be conscious of your success or failure in accomplishing your primary objective. It’s your own lookout and no one else.
Raising the bar of financial literacy
When you prepare a financial checklist, you’re raising the bar in preserving capital regardless of amount. You can cultivate a habit of handling available resources without being financially displaced.
In short, you’re covering all grounds to avoid being included in the growing statistics of Malaysians wallowing in debt. Starting the year with a financial agenda and taking the path to conquer financial difficulty is a victory to be relished.
This is article is prepared by Direct Lending – an online personal lending platform distributing koperasi & bank loan to civil servants in Malaysia