As 2010 winds down and we all roll into 2011 it’s time to make changes to less desirable aspects of our lives, and to set our new goals for the New Year. Is your New Year’s resolution related to personal finance? Do you want to get your finances back on track? Is your new year’s resolution to save more of your monthly income? Or is your new year’s resolution to give more to charity or start a charitable cause?
Regardless of your financial goal, here are some helpful tips to start loving and appreciating our financial lives. It’s almost a new year, and that means it’s time to get our Finances in Order and Make a Financial Plan, or revise our current Financial Plan.
The basis of any good financial plan is to make a realistic budget. Managing our Income and our Expenses controls all of our other financial goals since our budget controls our money and disposable income at the end of each month. If we don’t effectively manage our cash inflow over our out flow of monthly expenses we will never be able to achieve any of our other financial goals. I strongly believe that if our cash inflow and budget are on point, we can achieve any other financial goal that we set out.
Almost every financial plan and financial planner encourages us to create an emergency fund. I agree that it is important to have an emergency fund because we can never predict the future, and we need to be prepared for the unexpected. However, our budget and cash flow may not allow this extra saving. Having an emergency fund is a smart part of a financial plan, but it is not a financial necessity. In times of an emergency it is ok to use credit and accumulate debt for emergency purposes. A financial emergency (in my opinion) includes death and all costs associated with it such as emergency travel arrangements. A financial emergency is not buying something just because it is on sale.
Credit can be our friend if we manage our debt wisely. I can’t stress enough that we shouldn’t use credit as a personal loan for money that we don’t have to spend. Use credit as an alternate payment method, as oppose to paying cash or our debit card. Don’t use a credit card to pay for something that we can’t afford, or that we don’t have the money to pay for. Use small credit, such as a line of credit or a credit card, as a stepping stone to bigger and better things. Use a credit card to build a good credit score. This will allow us to be approved for a car loan or a mortgage in the future. Also you can check out for affordable personal loan rates in Singapore and work on your credit score.
Planning for Retirement is an important part of any financial plan. We definitely don’t want to be working forever. We are working now, and saving now, to enjoy the fruits of our labour later in life. I hope to retire at 55 and enjoy the last 25-35 years of my life. Don’t let anyone tell us how much we need to save for retirement; we should save what we can afford. This goes back to our financial plan basic of having a good budget. Of course retirement goals are great, and we may want to have $2.5 million dollars in the bank at retirement. But isn’t retiring a financial goal in itself?
Insurance is a crucial part of any solid financial plan. Some people don’t have insurance because they choose to save. However, I personally don’t think that savings are an alternative to insurance. Personal savings and insurance are complementary aspects of a solid financial plan. Insurance protects us for the unexpected. Our homes, our cars, our health, and our lives need to be insured to protect us in the case of an emergency.
There are two non financial aspects of a financial plan that are very important, but are sometimes over looked. We need to protect our identity. This includes monitoring our credit bureau, along with our bank accounts and credit card statements to make sure all of our transactions are legit. We should be careful and cautious to whom we provide our credit card information.
We need to keep informed about our finances. We shouldn’t enter into any agreements or sign any papers if we don’t 100% fully understand what we are getting into. Whether we are at our financial institution, with our mortgage broker or with our investment banker, remember that it is ok to ask questions. After all, it is our financial future.
(Photo by Army Arch)
Kristina Tahnyak
Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.
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