By: Alex Cook
If you’re like me, at the start of the year you spend some time reflecting on the past year and dream about what the new year could hold.
To help you kick start 2019, I thought I’d give you a short and simple list of resolutions that you could easily achieve.
Resolution 1: Set clear goals
Use the SMART Acronym.
Goals that are vague, are not goals, they are simply ideas whirling around in your head.
Goals that are vague, are not goals, they are simply ideas whirling around in your head. A goal needs to be specific (e.g. pay off my $200,000 mortgage in 10 years). They must be measurable, note the $200,000 in the last example. They must be achievable, that is you have the income required that is likely to help your save for that particular goal. It must be relevant to your life and lastly it must be time-bound, the one which is often ignored. Goals that have no time-frame are not urgent and get delayed until later…..much later…..
1) Build a retirement nest egg of $1 million to give you an annual income of $50,000 in retirement
2) Give 10% of my income to building God’s kingdom each year, and aim to increase it by increments of 1% of extra income each year.
3) Save $50,000 towards my kid’s private school education in 10 years.
But hey, nobody likes the word budget, so let’s call it what it really is, you’re spending plan.
Resolution 2: Do a spending plan
Do you get to the end of each month and wonder where all your money went? Well, there is a solution – a budget. But hey, nobody likes the word budget, so let’s call it what it really is, you’re spending plan.
A successful budget looks like this:
1st 10% – Give it to God – use it to build his kingdom
2nd 10% – Long-term saving – set it aside to achieve your goals
3rd 80% – every day spending
One of the common areas of mistake is having a mortgage or rental payments that are too big – i.e. your accommodation expense. I’d recommend no more than 30% of your income go in paying your rent/mortgage.
To download a budget planner grab my toolkit from here.
Resolution 3: Prepare for a rainy day
Recessions, retrenchments and health issues are part of life. Sadly, the majority of people live month-to-month (roughly 50% of the population), and as a result when the storms of life hit, they are thrown out of the boat into the swirling ocean.
The good news is that with some simple preparation, you can build a stash of cash as an emergency fund using a high interest, fee free, online account. How much you ask? Start with as little as $1,000, then aim to build it to roughly 6 months living expenses (definitely no less than 3 months). This will give you peace of mind, knowing that you don’t have to go into credit card debt, rip your kids out of school or sell the house just to stay afloat. Not to mention, it will keep your marriage less stressful!
Resolution 4: Save at least 10%
As per my spending plan suggestion, I recommend you set aside 10% of your income each month to save towards long-term goals. As most people find saving hard, I suggest you automate this process. Set up a monthly direct debit that moves the amount that you want to save from your everyday account to your long-term savings account. The money should be automatically transferred the day after you get paid so that it is out of sight out of mind!
Resolution 5: Protect your loved ones
Each year, we hear about the unfortunate premature death or disablement of someone whose acquaintance we’ve made. Not only does this often leave a spouse and children emotionally distressed, but too often financially distressed too.
One of the greatest favours you can give your family is the gift of an insurance payout in the event of your untimely death, disablement or sickness. Don’t believe the lie, that nothing can ever happen to you. Statistically more than a 1/3 of the population have some sort of disability (even if only temporary) before they turn 65.
So, protect yourself and your family with life insurance, total and permanent disablement cover and income protection.
And on that happy note, have a great 2019!
Article supplied with thanks to Wealth with Purpose. About the author: Alex is a licensed financial planner and the founder of Wealth with Purpose a Stewardship Ministry that helps Christians handle their money God’s way.