The FINANCIAL -- As in every important task, you need to have
a plan in place. Ask yourself what you want to achieve next year.
It comes down to what you want to prioritise in 2012, whether it be your children who will soon go to college, your mortgage, dream home or the annual vacation. Now that you have drawn up specific goals, remember the very basic, oft-repeated rule in every financial planning: create a budget and stick to it.
The question to ask at this point is, do you have the money to follow through your plan? You need to figure out exactly where all your money is being spent and how much you have left each month. To start off, write down clearly and in order your income and your fixed and variable expenses. This will give you a clear picture as to the size of your disposable money.
According to Shailesh Dash of Al Masah Capital, this would also be a good foundation from which to develop savings, spending, retirement, mortgage and vacation plans. If you have borrowed money from the bank or from somewhere else, paying it off should be your priority. Forget buying the brand-new sports car you've been eyeing for months or going on a summer trip to Monte Carlo if you're neck-deep in debt. It doesn't mean you have to pay all your debts at once.
Dash advises that debt payments that take up more than half of your monthly income require urgent restructuring. Payments should ideally eat up only about 15 to 20 per cent of what you make. Most people don't have funds set aside for emergencies or unexpected life events. According to a study by the Investor Education Foundation, only less than half of Americans have funds to cover expenses for three months in case of sickness, job loss, economic downturn or other emergencies.
Among the 18-29 age group, 31 per cent have emergency money while only 26 per cent of those with annual incomes below $25,000 have such funds. This clearly illustrates that many people don't have sufficient financial resources to fall back on if they were faced with sudden economic difficulty. If you want next year to be more prosperous for you, you need to take a serious look at your nest egg. Having emergency money is not enough. Set aside some funds you could use in the future, whether for your own wedding, your child's education or your vacation home.
Keep in mind that a reasonable rate of return can help maximise the amount you're able to save, so if you have money in the bank, review the terms of your accounts and look for better interest rates. No matter how young you are, you need to start planning your own future. Most people wait until they are old before they start worrying about their retirement years. If you're one of them, now is the best time to explore different options and map out a strategy on how you can retire comfortably.
The Employee Benefit Research Institute, an independent non-profit organisation, cited in a March 2010 report that more than a quarter of Americans have less than $1,000 in their retirement pot, while 54 per cent have less than $25,000. The number of workers who have virtually no money in savings and investments has increased. One of the great gifts you can give yourself in 2012 is the gift of knowledge. You don't need to be the next top financial adviser in the market, but it helps to know a little bit about finance. Check out some finance reading materials to brush up on your money skills.
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