HOW TO ACE YOUR MONEY GOALS THIS YEAR
Take stock of your finances, invest, pay off high-interest debt and save regularly, experts tell
As we step into the new year, now is the perfect time to take stock of our financial goals and set resolutions that can steer us towards a more secure and prosperous future.
Financial goals are in the top three New Year’s resolutions worldwide, say experts.
Saving more money, coming out of debt and reining in spending – in that order – are the top money goals for about 3,000 US adults in 2024, according to the annual Fidelity Investments Financial Resolutions Study, now in its 15th year.
More Americans are looking to prioritise long-term savings goals over short-term goals as part of their New Year’s resolution, the study found.
For those of you who are determined to make this year count financially, experts recommend some insightful money resolutions to consider for a financially secure 2024.
As an important first step, Rupert Connor, partner at Abacus Financial Consultants, recommends a stocktake of your finances.
“Take out a piece of paper or use the notes app on your phone or an excel sheet – whatever works for you – and write down these four things: Everything you own, everything you owe, everything you earn and everything you spend,” Mr Connor says.
“Save your new personal balance sheet and set a reminder on your phone to take stock of your finances again in one year. You can repeat this next year, but this time you’ll be able to see and track your progress. Over time, you’ll get into the rhythm of this exercise and be able to run your own health check on your finances.”
Anselm Mendes, executive director of sales and technology at the Continental Group, a financial services provider, recommends practising the “3Ms” of finance – measure, monitor and manage – in the new year.
Begin by tracking your expenses and correlate them with your needs. That exercise will give you a perspective needed for budgeting, he adds.
“Monitor your subsequent expenses while adhering to the budget. The resulting outcomes will help you unlock more savings and make strategic goal-based investments,” Mr Mendes says.
Financial plans require periodic course corrections based on market fluctuations and trends, he adds. You can optimise and rebalance your investment portfolio consistently, proactively shield it against imminent risks and continue to rake in risk-adjusted returns, he says.
Financial experts also recommend building an emergency fund. It is a pot of money that is ring-fenced from the rest of your money, says Mr Connor.
Ideally, it is held in a separate savings account. Savings accounts can be set up easily through online banking, to run alongside your standard current account, he says.
Aim to have a minimum of three months’ worth of expenditure held here, he suggests.
“You don’t have to do this all at once but try to start allocating a little of your salary each month into a savings account.”
Budgeting is another crucial aspect of planning that is essential for managing your finances effectively.
By budgeting, you create a structured plan for how to allocate your earnings across various categories, including housing, transport, food, shopping, dining, debt repayment, investing and others, says
Raunak Mehta, senior wealth manager at Holborn Assets. Mr Connor says if you can identify most of the “financial surprises” you can expect in a year, then you can plan and budget for them so that they do not derail your monthly cash flow.”
For example, if you had “buying a new motorbike for your birthday” under August, and it is going to cost $10,000, then you need to save $1,430 a month until then. If you cannot save that, then you cannot afford the motorbike, he says.
“Go back to your personal balance sheet and see if there is anything that you can strip out to reduce your monthly spending,” Mr Connor says.
“Reducing your monthly spending will free up money that you can then save to cover financial surprises. And once they’re covered, you’re saving for your own financial future.”
For Mr Mendes, no investment pays better returns than those you make in yourself, your goals and your personal growth and well-being.
People often get caught up in vicious cycles of extravagant spending, sacrificing long-term goals for short-term external validation, he warns. “So, save first and spend later. Even if you set aside a small amount, do so with rigorous discipline,” he says.
“Thanks to the power of compounding, you will incrementally achieve a considerable corpus that you can use to do/buy something you like and value.”
Rasheda Khatun Khan, a wealth and wellness expert, founder of Design Your Life and the author of
Millionaire Mindset – 6 Steps To A Wealthy Life,
says it is important to be clear about your goals.
If you cannot measure it, you will stop working towards your goals, she says.
“Write down your reasons. You have to get so emotionally connected to your goal that it is in your veins. This will ensure you are committed.”
When it comes to managing debt, prioritising which debts to pay off first is crucial, Mr Mehta says.
Typically, credit cards carry higher annual percentage rates compared with personal loans. It is wise to prioritise settling high-interest debt, such as the outstanding amount on a credit card, Mr Mehta says.
Once credit card debt is addressed, focus on tackling personal loans, he says.
“Create a debt repayment plan and allocate a portion of your budget towards paying off these debts as soon as possible,” says Mr Mehta.
“Consider negotiating with lenders for lower interest rates or exploring debt consolidation options to make repayment more manageable.
“For instance, while credit cards often carry an interest of around 36 per cent per annum on outstanding amounts, personal loans usually have rates of 6 per cent to 7 per cent per annum.
“If managing multiple credit cards becomes challenging, consolidating them into a single personal loan might be a more viable option.”
Mr Mehta also suggests using the snowball method, which involves focusing on clearing the smallest debt first.
As smaller debts are successfully cleared, you gain momentum and the motivation to tackle larger debts, he says.
Diversify your investments. Mr Connor says anything you save above what is needed in your emergency fund should not be kept sitting around in cash, as inflation will erode it over time – you will lose 2 per cent to 3 per cent every single year on money you have sitting in cash. “Once you’re saving above your emergency fund, think about the five-year rule – are you going to need the money within the next five years? If the answer is yes, then keep your savings in cash [perhaps even set up another ring-fenced savings account and give it the name of your short-term goal – for example, house deposit 2024],” he says.
“But if the answer is no, then you should invest this to make sure your money is growing above inflation.”
Mr Mendes believes a mere savings-orientated approach of holding money in bank accounts for nominal interest and relying on a single source of income is old-fashioned and counterintuitive in today’s dynamic macroeconomic environments.
It is advisable to diversify your income sources and investment avenues. Digitalisation and hyperconnectivity today provide ample opportunities to create new passive income streams through emerging asset classes, rental incomes and more. The idea is to refrain from keeping all eggs in one basket, he says.
Mr Mehta says cultivating a regular habit of increasing your investment contribution by at least 5 per cent each year can make a significant difference.
Finally, set up a forced regular savings plan.
A lot of people are great at paying off their credit card and utility bills on time. However, when it comes to setting aside money on a regular basis, the majority of them fail, Mr Mehta says.
It is a no-brainer to automate your investment plans on a monthly or quarterly basis, which will ensure you have a small portion being invested towards your future financial goals, he says.
Start small, he advises, but pay yourself something before you pay off everyone else in 2024.
No investment pays better returns than those you make in yourself, your goals and your personal growth, experts say