Are you looking at how the December break drained your bank balance and wishing you had done a better job of saving more or are you just keen to avoid last year’s money troubles this time around? Then look no further, this one is for you… Your money matters!
New Year’s resolutions often tend to come and go with a negligible amount of them working out as planned for many of us. The rest is forgotten somewhere in life’s ‘wild-maze’ and perhaps regretted later. Anyway, as you embrace the allure of a fresh start to 2022, give the slip to old habits and create new lasting money and finance goals. It is important that you reset your personal finances and goals for 2022. This is a great time for setting some good financial goals and taking control of your finances.
As a point of departure, always reflect on your previous year’s budget and spending patterns as this is essential in deciphering how great you managed your money, where you went wrong and what aspects need improving. Thereafter, create an annual budget in which you set out small realistic goals that will help you work toward your larger goals. Crafting an annual budget is one of the cardinal financial aspects but often gets snubbed. A wise person should have money in their head, but not in their heart. Remember, it is only you that can decide how to budget your money and set the wheels in motion. For many people, reducing their spending and paying off debt is their top priority. Generally the simplest, but effective budget approaches is to get out of debt first and then build wealth. You can’t make much financial progress while you’re building someone else’s wealth.
Evaluate your bills and debts. Have a list of all your monthly and annual routinely expenses and prioritize associated payments. Set-up a debt payment plan and commit to your plan all year long. Paying off debt is sometimes an enormous feat of dedication and endurance. However, consider paying off the smallest debts first especially those with higher interest rates like your credit-cards, and retail accounts as well as your once off high expenses such as school fees, then work toward the larger debts like mortgage and car repayments. In tandem with this, identify non-essentials and cut down these unnecessary expenses and live within your means. Ensure that your expenditure is less than your income, but remember that budget adjustments may be needed to accommodate your growing needs and changes in income.
Another important key to financial success is saving money. Strive to save at least 10% of your monthly income, apart from your retirement contributions. Having something in mind that you are saving up towards will be an incentive for putting money away regularly. With this savings plan, you can now go for the ‘Sho’t left’ trips with your friends. As part of your general savings, it is further advisable to have an emergency fund with money ONLY to be used for a dire circumstance. Build this fund to a healthy level of at least 3 months’ pay. It can be handy in case of job loss, medical bills or other unexpected emergencies. If the greater part of 2020 and 2021 is anything to go by, we know that you could be employed today and jobless tomorrow or healthy today and tomorrow be gravely ill. Such experiences have taught us to gear up for those “rainy-days”. Where possible and the pocket is deep enough to permit, cater for sinking funds. These are funds accrued for foreseeable expenses like car service, gifts and home renovations. Start saving for those expenses now and they won’t be unexpected when they eventually happen.
As a Parthian shot, learn about money and finances. They often say, “your mind is your best weapon” and that “knowledge is power”. Empower yourself by researching online, reading financial books and learn great investment lessons from successful investors. Investing is a great way to make money work for you without any academic degree. An investment in knowledge gives the best return.
If you consider making these financial changes, you surely will not require the pernicious services of loan sharks and be on your way to financial freedom in 2022.
Please note that the above is for information purposes only and does not constitute tax/financial advice. As everyone’s personal circumstances vary, we recommend they seek advice on the matter. Note that while every effort is made to ensure accuracy, Nexia SAB&T does not accept responsibility for any inaccuracies or errors contained herein.
Article prepared by: Tinashe Chipatiso – Tax and Corporate Consultant
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