One of the common goals for the New Year is something related to money. It could be saving more, spending less, paying out debts or investing. In most families, mine included, it’s the mommies/wifeys who handle financial matters. I have learned a few things along the way and I thought I would share it with you. This is mostly applicable if you are starting out or needs a little bit of help to improve your finances. The tips maybe “old school” but please read through as you may find new ways to apply these in your life.

BUDGET

You may have seen this in most, if not all personal financing essays and it’s because there’s no way you can handle finances without knowing how to budget. Have you ever experience checking your bank accounts and wondering why you money all gone? I may not be able to answer that but one things for sure, the money was spent! That is the nature of money, it always gets spent. The common mistake we all make is letting our money go without our control. It is our responsibility to tell our money where it should go and we do that with the budget. Budget is about assigning our money on where it should be spent: food, rent, utilities, savings and others. This way you allocate your money and you know your limit for each spending. Also this lets you know when you can afford to do extra shopping. When making a budget, remember to create a buffer. Do not squeeze the necessity just to make room for leisure. Be realistic and prioritize needs over wants. Most importantly, set aside savings first before allocating your money to expenses.

ENVELOPE SYSTEM

Now that the budget is in place, it’s time to live with it. What good is a budget if we do not follow it, right? Here’s a hack on how to stick to your budget, the Envelope system. This means assigning an envelope to a particular budget item like food, groceries and utilities and putting the allocated money on it. Yes, this means withdrawing everything in the ATM and using physical cash. I understand, I know most of the things can be paid through the ATM and it's more convenient and safe. But hear me, the main reason we went out of control with our spending is because of those plastic cards called ATM card, Debit card and Credit card. When I still use my cards, I am unaware of my remaining balances and always wonder where my money goes whenever I checked online.  But when I switched to cash only payment, not only that I’m aware of how much I spend,  I think twice before buying anything because it is more emotionally painful to see the hard earned cash  departs  from the wallet. Try it! When you see the money in the envelopes gets spent, you tend to spend it mindfully forcing you to live within your means.  This system works so much for us. This is an oldie but goodie trick!

EMERGENCY FUND

If you have it already, good for you. If not, read on. Let me tell you, one of the most budget wrecker is emergency and no matter how much you prepared for it or avoid it, emergency just come your way. Something broke down, someone got sick, emergency! That is why it is important to establish emergency fund first and foremost. What is Emergency fund by the way? It is an equivalent of three to six months of spending, set aside as purely cash and available for use anytime. But what if you have debts and having a hard time making both ends meet? Then it is all the more important to build the emergency fund. The more you have a negative financial balance, the more emergency will lead you to further debts. So build this first. In this case, David Ramsey suggests building Starter Emergency Fund equivalent to USD 1,000 as fast as you can. To be able to do this, you may want to get a part time job, or sell some of your stuffs that you no longer use, or took more overtime work. Whatever it is, do something to build the emergency fund.

One thing people are excited about New Year is that it signifies new beginning. For some, it’s about New Year’s  resolutions, list of things to change or a time to update the bucket list. I am a believer of goal setting. Setting a yearly goal gives a road mad towards the dream. For example, if my dream is to have 10 million retirement fund, my goal for this year could be to save 500 thousand by the end of the year. This will make me a little bit closer to my big dream. If you want to a little help on how to set goals, I have three points for you.

SET BIG GOALS

They say shoot for the moon, even if you miss you’ll land among the stars. That’s true and the same with setting goals. We should aim for big goals. It must be big enough that you’ll be the happiest person if you accomplish the goal by the end of the year. What’s the use of a goal if it doesn’t excite you? If it’s too easy, chances are you will not work on it. The goal should get you inspired to wake up every morning and do something about it every single day. It must activate your faith and makes you work hard.

SET REALISTIC ACTION PLAN

Let’s talk about reality, shall we? After setting idealistic big goals, we should sit down and think about the actual steps we can do about it. Here’s my example. One of my dream is to run a marathon. My goal for this year is to be “fit enough to run half a marathon”. I do my research and found out that this means I should be able to run 3 to 4 times a week at least 5 kilometers per run. That must be a a realistic plan right? To some yes, but to me nope! For someone who hasn’t run for a year now, this will just create frustration. The realistic plan would be to get to running again at least 3 times a week for half an hour per run. From there, I can modify the action plan as my stamina builds up and eventually reached the goal.

HAVE AN ACCOUNTABILITY PARTNER OR SYSTEM

Evaluation. To see goals come into reality, we should learn to evaluate. What level am I now? What have I accomplished so far? Am I still on it? Having someone who can evaluate us is a good help and an additional encouragement. But if you are someone who are shy to share your progress or can’t really find the right accountability partner yet, build a system that can help you evaluate. For example, for the financial goal, a budget is the accountability system. By comparing budget and actual savings, you can assess your progress about your savings. For the health goals like running, there are many apps that you can use on your smart phone. You can choose either options or have both. But bottom line, figure out a way to evaluate the progress of your goals as this will keep you on track and keep you going.

So that’s about it. I hope this will encourage you to set goals and get going for 2017. Happy New Year!