It has been so typical for us to include being physically fit on our new year's resolutions, but aside from resolving to be physically fit, maybe this is the year for you to become financially fit as well.
Here are 7 simple and very doable resolutions that can help you become financially fit this year:
1. "I resolve to review my finances"
The first thing you should do is lay out all the necessary details about your finances. How much is your net income? What are your fixed expenses? Do you have an emergency fund? Do you have debts and loans and are you aware of their interest rates? What investments do you have?
These are just some of the important questions that you need to ask in order for you to have a clear picture of your current financial situation. This will give you an idea as to how you can improve your finances.
If you've never done this before, make this the year you finally do! I suggest that you look for a financial adviser or mentor who can help you on this.
2. "I resolve to create and stick to a budget"
Knowing how much you earn, spend, save, and invest are the key ingredients to being financially fit. Know where your money goes. One of the simplest formulas that you can use for budgeting is the Abundance Formula: Income (100%) - Tithes (10%) - Savings (20%) = Expenses (70%). Try it out for the next few months! New Year’s Resolution-making is the perfect time to start new habits. Make budgeting one of them.
3. "I resolve to reduce/eliminate my debts"
Some say, "Getting rid of debt is like losing weight - it results from discipline." So this year, if you want to become financially fit prioritize paying off your debts. When you have too much debt it will surely weigh on you and hinder you from achieving or doing the things that you want to pursue - such as traveling, enrolling for a short course, moving to a job that you're passionate about, helping out a charitable organization, etc.
So what should you do? How do you start? The very first thing that you can do is to consolidate your debts. Create a list. In terms of eliminating them, there could be many different ways. Here are some tips to get rid of your debts:
If in case you won't be able to become completely debt free this year, what you can do is to set a debt repayment goal. Identify which debts do you want to pay off within the year and make sure you commit to that. Be mindful of the things that you spend on. Make sure that you don't get yourself into a debt-trap.
4. "I resolve to save and invest more"
#FinancialGoals. Set a specific goal and exceed it! Excite yourself by identifying how much money you want to save and invest by the end of the year or within the next 5, 10 or 15 years. Let's say, you wanna get married in 5 years, or you want to buy a house in 10 years time, or go for a European Tour with your future family 15 years from now, as early as today, start saving and investing for those goals, while making sure that you also have savings and investments that will secure your long-term goals such as retirement, your child's education, etc.
To keep things simple, what you can do to make sure that you're able to set aside a specific amount every month is to use the Abundance Formula (10-20-70). Let's say your Monthly Income is P20,000, 20% of P20,000 = P4000.
What does this mean? If you're earning P20,000 monthly, you should be able to save and invest at least P4,000 every month. In a year, your P4000 monthly savings will amount to P48,000, and in 5 years, that's P240K. Take note, this is assuming that you're only saving and not yet investing. I'd like to emphasize on the term invest. According to dictionary.com, a simple definition of investing is to put money to use, by purchase or expenditure, in something that would offer potential profitable returns, interest, income, or appreciation in value. So, let's say you put your P4000 on an investment vehicle that earns 10%/annum., at an average, in the next 5 years instead of just having P240K you can have as much as P370,000. Again, you can only get that if you invest.
So what are your possible options? Investments like stocks, mutual funds and other paper assets, healthcare plans and insurances are all good investments. They're all essential in securing both your short-term, mid-term, and long-term goals. Through these investments you can take advantage of the power of compounding interest, beat inflation, and make money work for you.
I would love to discuss more about investing on a separate blog. Needless to say, make this the year you begin investing! Stop wasting your time, money, and opportunities. (You may read about the cost of our waste of time, money, and investment opportunities here.) Learn more about investing through financial literacy seminars, books, videos, etc.
5. "I resolve to create my emergency fund"
Sometimes things don’t always go the way you planned. Although slim, there’s a chance that you could lose your job if the company you work for goes bankrupt, or if the management decides to trim the workforce. Even worse, (and I personally pray this doesn’t happen to you) you or one of your family members runs into a medical emergency, or is affected by a natural calamity. What happens then?
That’s what the emergency fund is for. It prepares you for those unwanted, unexpected, uncertainties of life. Think of it as your buffer – something that softens the impact of those situations, without having to get into debt, borrowing from your relatives, or touching your investments. Ideally, your emergency fund is 3 to 6 times the amount of your monthly income.
6. "I resolve to earn more...so I can give more"
A lot of financial blogs give emphasis on reducing one's expenditures and there's nothing wrong with that – but instead of cutting your expenses, why not just earn more? It's equally important to give emphasis on increasing one's cash flow. One of the secrets of the truly rich is that they have many income streams. Why? Here's the truth, they believe that there’s no limit to how much one can earn. Want to be truly rich? The first step is you have to believe the same thing.
If you've been postponing your dream business or that passion project for many years now, make this the year that you finally bring them to life! Do a freelance job, sell baked goods, put up an online shop, or be a virtual assistant to somebody! Getting into a side business has never been as easy as it is nowadays. Having more income streams isn’t impossible.
And hey, earning more not only enables you to achieve your personal goals faster, it also increases your capacity to give – and giving is always a good thing.
7. "I resolve to have an abundance mindset"
"Wealth is created in the mind. Money problems are mind problems. Unless you change your self-portrait, you won't change your life. You get what you subconsciously want. If you want to be rich, it's up to you." -Bo Sanchez
Let me be completely straightforward about this, if you want to be financially fit this year, start by having a change in your mindset. Until we change what's on the inside, we cannot change what's on the outside. No matter how practical all these resolutions are, if at the end of the day you don't believe that you were meant to live in abundance, all the other resolutions will be pointless. Put it in your mind that you deserve to be wealthy, and that you will be wealthy!
Let this be the banner year for your finances!
Have a blessed 2017!
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About the Author
Chai Santiago is a graduate of Manufacturing Engineering and Management from De La Salle University who later on found her passion and purpose in the Financial Education industry. She is a Certified Financial Educator® (CFEd®) under Heartland Institute of Financial Education (HIFE) and a Financial Coach at International Marketing Group (IMG).