For a more abundant 2018, try completing these 12 financial goals, focussing on 1 goal each month.
The new year is here, and with that comes a new start. But beginnings are always tough, especially with money – how are you going to meet those financial goals, without making life miserable? The answer is to take baby steps – one goal per month.
Month 1: Review Your Automated Payments and Cut Waste
Time to clear out the debris. Look closely at all your automated payments – these include gym memberships, TV and Netflix subscriptions, lunch delivery services, premium memberships, etc.
Your first goal of the year is to clear out everything you can live without. There’s no need to subscribe to TV channels if you just use Netflix anyway; nor is there a need for gym memberships, if you only have time to exercise once a week.
Be honest with yourself, and cancel what you don’t use.
Month 2: Lower Your Interest Rates
Check if you can replace your loans with cheaper alternatives.
For example, say you owe S$2,000 on your credit card, which has an interest rate of 26 per cent per annum. You could take out a S$2,000 personal loan, which has an interest rate of just six per cent per annum, and use it to pay off your credit card. In this way, you’ve effectively replaced your 26 per cent per annum loan with one that’s just six per cent.
If you have the cash to clear out your entire debt in six months, consider paying it off with an interest-free loan (most interest free loans last for six months, before reverting to a different interest rate).
Month 3: Raise Your Savings Rate by 10 per cent
From this month onward, try to raise your savings rate by just 10 per cent, for the rest of the year. This comes to a surprisingly large sum.
If you earn S$2,500, and can save an additional S$250 a month, that’s S$2,250 extra by the end of the year. This sum can be used to clear out debts, invested for retirement, retained for emergencies, or just pay for a year-end vacation.
Month 4: Review Your Insurance Policies
If your financial adviser hasn’t called you, then call them instead. Check out your existing insurance policies, and decide if they still provide adequate coverage for the cost.
Bear in mind that, for policies such as Integrated Shield Plans (IPs) with riders, the cost typically rise every year.
Also look for overlaps in your insurance plans. For example, if your employer’s group insurance covers your dental costs, then there may be no need for such “extras” in your own health insurance.
Speak to more than one financial adviser, to get a second or third opinion. And don’t be afraid to let bad policies lapse, if a new and better one comes along.
Month 5: Review Your Retirement Plans
You should have some clear targets for retirement. At the most basic level, you should know your desired Income Replacement Rate (IRR). An IRR of 70 per cent, for example, means you’d want 70 per cent of your current income to be available at retirement.
Check if your insurance policies are on track, to meet your retirement needs. (Ask a qualified wealth manager of financial advisor, if you need to)
Month 6: Clear out Your Unused Stuff
At the midpoint of the year, it’s usually a good time to clear out your unused stuff.
Whether it’s untouched Christmas presents from last year, or books you bought but never read, now’s the time to sell it off. Use sites like Ebay or Carousell, and make a habit of hosting an online “garage sale” once a year.
Month 7: Prepare Your Upgrading Budget
Make a list of all the things you absolutely must upgrade this year, such as your smartphone, laptop, television, etc. You want to start looking for viable alternatives now, as the second half of the year is when the better deals come about.
Always have a budget – or a specific shopping list – before walking into the store. This minimises any temptation to make impulse buys (e.g. walking out with an additional smartwatch and a new tablet, when all you intended was to get a new phone).
You don’t have to make the actual purchases this month; merely start your research, and cement the budget.
Month 8: Raise Your Income (by at least 5%)
Every year, aim to raise your monthly income by just five per cent. This is a realistic goal, as opposed to pipe dreams such as “I’ll make S$10,000 more a month”. And if you do this every month of your life, your income growth will compound over the years.
For this month, make actual concrete attempts to grow your income. Try things like painting walls for someone, dogsitting, washing cars, or even starting a small side-business.
Try at least three different ways. If you don’t succeed, try again next year.
Month 9: Top Up Your Savings Fund
If you’ve tapped into your savings fund for any reason this year, now is the time to replace it. If you can’t replace the whole amount at once, then commit to putting more into your savings for a short span (say the last quarter of the year), until it’s topped up.
A savings fund is important, as it removes your reliance on high-interest loans during emergencies.
Month 10: Lower Your Home Loan Interest Rates
Check the interest rate on your home loan, and compare it to what’s available on the market. There’s a chance you can find a much cheaper alternative, and it may be worth your while to refinance.
Speak to an independent mortgage broker, or use comparison sites to find the cheapest home loan options.
Month 11: Optimise Your Credit Cards
There’s no need to have more than three credit cards. Check out the rewards, such as cashback or air miles, that your current cards are getting you. If they’re no longer adequate to your purposes, cancel them and look for better options (but rememeber to spend all the reward points first!)
Always close credit accounts that you no longer need, as credit cards do charge an annual fee. Also, having too many credit card accounts can lower your credit rating.
Month 12: Invest Your Year-end Bonuses
This year, invest your year-end bonuses instead of indulging. If you already have an investment portfolio that’s doing well, consider topping it up, or diversifying with other assets (e.g. if you have a big stock portfolio, consider buying some gold for diversification).
Don’t squander your year-end “windfall” on things like a casino visit, or more unnecessary gadgets.
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By Ryan Ong
Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.