Personal finance action plan for 2015

Jan 04, 2015

Making resolutions has become a must-do activity at the beginning of every New Year. However, the test is the end of year review.



By Sylvia Juuko

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?


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.
 


Do not wait for financial expenses to overwhelm you


Explain to members of your household that some luxuries need to be foregone because big ticket items have to be paid for.

They have to appreciate that they cannot have it all and that trade-offs are a reality. Another item in your action plan that you need to emphasize this year, (if you have not cultivated it already) is the culture of saving.

Savings should begin from the monetary aspect of setting aside a percentage of income in line with your income. Nothing beats a standing order with your commercial bank if you are not disciplined at saving. Other aspects of saving should be emphasized in all areas in your household.

They should learn to save on power and water etc. Instill a culture of avoiding wastage especially in the kitchen.

This can be done through planning your meals in advance. Grocery shopping should be done in bulk and the weekly shopping should only be confined to fresh produce. Some of these issues are considered mundane but when you do an inventory and ascertain the kind of waste in this area, you will be surprised at the level of losses you are making.

On the investment front, this has to be an action item. There is no other formula to grow your money on a sustainable basis than investing it.

This comes with a lot of study and willingness to dedicate time and resources in this area. Relatively, you have to consistently learn new ways of doing things by brushing up your financial education.

This is a lifetime learning process that does not end with your diploma, degree or PHD. Spend time to acquaint yourself with enhancing personal financial management.

Never tire of learning how to do things, getting information, using the networks you have to learn and building new ones. Identify mentors who can provide business advisory and money management counsel.

To stay on the course of action, get an accountability partner who may be a member of your family or one of your peers whose role is to follow-up on your action plan periodically.

At the end of 2015, you will have gone a long way in improving your net worth.


The writer works with Bank of Uganda

personalfinance222@gmail.com

 

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