columnBy Martin Mwinga
HAPPY New Year! I hope that 2013 brings you much success and prosperity in all your endeavours, and don't forget to stay focused, remain creative and innovative. The New Year usually brings with it a sense of renewal and making New Year's resolutions helps you to focus on making positive changes in various aspects of your life. I hope that 2013 will also give you a unique opportunity to implement strategies that will get your finances in order, build your wealth and secure your financial future. Your New Year's resolutions are your new goals you set to achieve during the rest of the year.
Setting goals gives you long-term vision and short-term motivation. It focuses your acquisition of knowledge, and helps you to organise your time and your resources so that you can make the very most of your life.
By setting sharp, clearly defined goals, you can measure and take pride in the achievement of those goals. You will also raise your self-confidence, as you recognize your own ability and competence in achieving the goals that you've set. In the area of personal finance, setting financial goals will enable you to regain control over your finances thereby allowing you to focus on the things you enjoy doing in life.
In this first consumer education lesson of 2013, I thought it might be time for a handful of resolutions dealing with personal finances. Some resolutions are things that one can start doing right away; others are things one would like to stop doing.
Prepare a Comprehensive Personal and Family Balance Sheet
To have a clear understanding of how you can achieve your financial goals and dreams, the first step is to prepare a comprehensive personal or family balance sheet, one that encompasses the full range of all your resources, assets, debts or liabilities, as well as your portfolio of investments such as shares, bonds, property, cattle, goats, and other investments.
You must also include here the value of your retirement accounts, and all assets on which you have no property rights such as land you own in un-proclaimed areas and cattle in communal land. Preparing a personal or family balance sheet will help you to have a clear picture of where you stand financially and help you to know your personal financial net worth, by establishing how much you owe other people (your total debts), and the value of your assets.
If you have a negative financial gap, that is if your debts or liabilities exceed your assets, do not panic as this helps you to know and to see where you can make adjustments to ensure that your net worth starts increasing in 2013.
Improve Your Financial Education
Our formal education system does not address what you need to know about money and it does not prepare us for the financial decisions we need to make when we enter the workforce. Most of us learn about personal finances through trial and error. Financial mistakes are often costly and can take years to erase. Make it one of your top New Year resolutions to improve your knowledge of money matters through personal finance seminars that I will be running this year, reading personal finance articles, personal finance books, magazines, newspapers, seeking professional advice and joining investment clubs with a strong financial education component.
My New Year's resolution in 2013 with regard to continuing to enhance and improve my financial education is to conduct 10 financial education seminars across the country in 2013 and hope you will have the opportunity to attend one of these seminars.
Open a Christmas & Holiday Account
Start putting money away now for the 2013 holiday season. If you set aside a certain amount each month and have it automatically transferred into your Holiday Account, you won't even know it's missing. Come December 2013, you'll have a tidy sum to spend on Christmas presents and enjoy a rewarding vacation with your loved ones.
Don't keep these funds in your regular savings account, but open a new holiday account and invest these funds in accounts offering better returns.
Cut out Small and Other Expenses
The first thing you need to do to prepare for challenges and opportunities in 2013 is to change your priorities by switching from luxuries to core needs like food and shelter.
There are certain things you can do without and still maintain a good lifestyle. You may be doing a great job tracking your large expenditures, but those small expenses multiply fast. Instead of buying lunches at work, bring leftovers from home, disconnect your DSTV if you are not utilizing all channels, stop your monthly gymnasium payments and start jogging, cut down on your food budget by buying from cheaper stores or targeting specials, cut down on cellphone expenses, buses, re-look your insurance premiums and stop the ones you might find you no longer need e.g. car insurance premium on an old car without book value.
Create a Budget
Create a spending plan and most importantly, stick to it. Get into the habit of balancing your income or salary, and paying your expenses will help keep you on track. A good budget will help you to plan and monitor your expenses so you can identify where your money goes and where to cut back if necessary.
When planning your budget, start by making a list of all your outstanding debts, who they are owed to, and how much you need to budget each month to keep up with the payments.
Always remember that if you fall behind with payments, your financial situation will deteriorate, as costs, penalties and interest charges mount up. It is also worthwhile keeping the list of actual amounts owing at the start of the year, and then see if that figure can be reduced by the end of the year.
Reduce or Deal with Debt
While it's nearly impossible to go through life without some sort of debt, reducing and getting out of debt is another key step to taking control of your finances. Some of us got deep into the red as a result of overspending during the festive season through the use of extra finances such as personal loans and credit cards to fund seasonal shopping.
Make a list of all personal debts and begin targeting the lowest debts first. Attacking the lower debts would give a greater sense of personal accomplishment and show more and immediate results for the effort. Having your debt under control gives you more freedom to do other things. It will take some sacrifice, but it is worth the effort.
There is saying, today's problems come from yesterday's solutions. I wish you a successful and productive 2013.