By Sylvia Juuko, New Vision
Making resolutions has become a must-do activity at the beginning of every New Year. However, the test is the end of year review. If it has not worked in 2014, how do you expect to come through in 2015?
There are so many financial demands targeting your source of income and, therefore, you need to plan your expenditure carefully in order to satisfactorily foot your bills in 2015. (New Vision)
Just like in all aspects of your life, the New Year is a good time to make commitments in the area of personal financial management. To do things differently this time around, think of it as an action plan from 2015 and beyond. For every household that discusses issues related to finances openly, the first thing to do is to agree on what you want to achieve from the year 2015.
Once you reach a consensus, assign each individual tasks as well as timelines. For those who already have a rolling plan, emphasize or tweak a number of items in your financial plan to align them with the prevailing financial status and life stages.
By now, you should have reviewed the year 2014 to get your current financial position. This entails computing your current level of assets and liabilities. Knowing the assets you have including savings, investments and loans gives you an accurate financial position as opposed to only looking at your current income.
Your networth gives you an indication of how long you can support your lifestyle if your current flow of income is severed. This position has to improve if you are to get nearer to financial freedom. It is from this assessment that your household can determine the urgent items to take care of in 2015.
For example if you have a negative net worth because of your high outstanding debts, then that’s an area that needs urgent attention. Plan how to reduce your debt either through increasing repayments (if you have room) or get other sources of income to help clear it.
Critical to your action plan, is figuring out how to reduce the risk of being one pay check away from poverty.
This can be done though taking a critical look at the spending habits in your household. There are expenditures that are a must including food, shelter, transport, health, utilities, tuition, and clothes.
These should be planned for early to make sure you are not in a situation where your kid is going back to school the next day and you are still running around looking for tuition.
It is clear how many times a year you need to pay tuition, therefore some of these expenditures need to be planned for in advance. Learn to prioritize your expenditure. For example, you would be irresponsible if you spent all the money on entertainment today yet you have tuition to pay.
Avoid anxiety by managing expectations in your household through giving them a clear position of what priorities should be in line with available resources.
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