Everyone is back from the holidays and hopeful for the coming year! It’s the time when we can start anew and build ourselves to the next level. Or so we hope.
Worry not, we’re here to give you some tips in maximizing the New Year! And we can start with your finances.
Is Money Important?
Well, money is not the most important thing in the world. But the money you have will heavily dictate the quality of your life. It would give you choices that might directly affect you and your family.
I mean, it might be quite materialistic, but if you fix this aspect of your life, you can surely be a step closer to a life of happiness. So what should you target this year? Here are 9 financial checklists you can follow for your financial goals.
If you haven’t already, you should follow a budget. There are hundreds of budgeting methods. And the best budget is something you can stick to.
Although we suggest that you try out the 6 jars method to balance all your expenses into avenues like investments, charity, education, and play.
After all, like dieting, budgets that don’t restrict you as much can be more sustainable in the long run.
Pay Your Debts
As a responsible citizen, you should be paying all your debts. If you don’t fix this cycle, it will consume all your earnings through interest expense. It’s time to devise a plan that can create results.
There are two popular methods to do this. One is through Debt stacking, where you pay off the obligation with the highest interest rate first, and make minimum payments for the others.
The second one is the snowball method, where you pay off the debt with the lowest outstanding balance, and make minimum payments for the rest.
There is no right or wrong method. There are just advantages and disadvantages. The debt stacking method can save you money from interest since you’re paying off the most onerous one first. But the most onerous one might take too long to pay up.
On the other hand, the snowball method pays up the ones with the minimum balance first. It doesn’t have any advantage as to cost. But it can have a psychological effect if you tick off one debt from another.
So find the payment method that works for you this year.
The past year showed how challenging and unpredictable the world is. If you suddenly lost your job from the pandemic, having no emergency fund will be extremely difficult for your family. That’s why the biggest financial goal you should have this year (if you haven’t already) is an emergency fund.
An emergency fund can be roughly 3-6 months (best if at 6 months) worth of your absolute necessary expenses. These are food, shelter, clothing, utilities, etc. Your emergency fund gives you a leeway to find other sources of income just in case you lose your job.
If you have too much debt, at least have 1 month worth of emergency fund to avoid borrowing money when something bad happens.
Get Life and Health Insurance
But emergencies do happen. And some emergencies can be too overwhelming that it can wipe out all your savings with just a snap. So to hedge your finances, it’s time to invest in life and health insurance.
Yes, you might have the money to pay for your hospital bills. But do you really want to spend all your hard-earned money on your medical bills? No, thank you!
When you have life insurance, you can opt to include a critical illness component where you can get lump-sum money just in case. As for normal health concerns, health insurance will protect your money from unexpected expenses.
Rarely can a job secure your financial freedom. On average, a millionaire has around 7 streams of income. This allows you to be protected when one stream of income falls short. And you can do this by slowly giving your time to side hustles.
A side hustle can be a part-time online job or a business. As long as you can learn it and give ample time, it might provide dividends in the future.
Do you want to grow your money? Every Peso you have can actually work for you. It depends on your level of income, but roughly 10% of your income should be allotted to investments. Because the power of compound interest can actually make your rich.
If you’re just starting, probably invest in low-risk financial vehicles first. Something like high-yielding deposits, UITFs, and mutual funds. Here are some you can check out.
You can invest in these accounts for as low as P500 (MP2) – P1000 (BDO). As for Gsave & ING, you can enjoy up to 4% interest just by putting your money there! Sweet!
Why should you give charity to other people if you don’t have enough for yourself? Well, this might be a question bugging you. But, understand that it doesn’t matter how much money you give. What matters is what you are willing to give.
And these can provide a feeling of abundance in your mindset. If you can part ways with money willingly, you can attract more money to you as well. Of course, don’t expect to get some returns. But ironically, opportunities really flow in.
When do you start saving for retirement? Should you even think about it? Well, a lot of people forego preparation for retirement. And when they do arrive at that age, they can’t rush saving for it.
So when do you start? You can start as early as now. And the PH government has a retirement option called the Personal Equity and Retirement Account (PERA) investment. For as low as 1,000 PHP per month, you can already invest for your future retirement.
The PERA account allows you to have a tax-free investment with tax credit perks. You can’t withdraw this until 55, but at least, you have the money by then to enjoy when you are retiring.
Budget for Fun
What’s life without fun? A lot of financial gurus stop you from having that Starbucks coffee or that sumptuous Samgyupsal. I mean it makes sense. Accumulated purchases from expensive items might mean savings for the year.
But do you really want to live just for the basic necessities? Is living just about savings without enjoyment? NO!
For this year, it’s time to allot money for fun! It can be 10% of your income or whatever percentage might make sense for you. In this way, you can enjoy your money guilt-free while saving up for the things that matter in the future.
Are you ready to make this year the best financial year of your life? What are the things that you will implement for your finances? Comment down below! Happy new year!!