Making your new year resolutions?

January 5, 2015 | Filed under: This is Money | Author: Modestus Anaesoronye

This is the time for New Year resolutions. What are you planning to do in 2015?

While it is not a do-or-die affair, it becomes important so that people do not work or walk without vision. The key is to avoid vague resolutions or impossible goals and instead decide on a set of very specific, doable steps.

For example, don’t say, “In 2015 I’ll get out of debt!” – It makes just as much sense as saying, “In 2015 I will lose weight.” Just as you need to break the “lose weight” resolution into small, manageable steps, you need to do the same when it comes to financial resolutions, and outline a detailed plan for how exactly you will achieve your financial goals for 2015, expert says.

Therefore, as the current year moves with its challenges, tie your resolutions to things you can quickly hold onto…

Monthly budget

Preparing a budget isn’t difficult – it just takes time. It will probably take you about 2 hours, and this will be time well spent. Having a budget and sticking with it is one of the most important ways to improve your finances and to avoid unnecessary debt. It forces you to see the bigger picture of your finances, and to view single purchases in the context of that bigger picture.

Save more aggressively

This is actually part of planning a budget, but it’s important enough to justify a separate resolution. Finding places where you can cut costs and saving more aggressively will enable you to repay any debt you might have faster and to build an emergency fund.

When you go through the process of planning a budget, finding those expenses that you make out of habit but that you can live without is an extremely important step. In my case it was recreational online shopping. When I took a long, hard look at my financial behaviour, I realised that I was in the habit of visiting my favourite online fashion store almost DAILY, even though I obviously didn’t need to buy new clothes that often.

Emergency fund

Should you pay off credit card debt first and then create an emergency fund? Experts are divided on this one. Here at Money Ning we feel that paying off credit card debt should be your first priority.  If you don’t have credit card debt, or once it is paid off, it’s time to start saving for an emergency fund. Try to have at least 6 months’ worth of living expenses in your emergency fund. Yes, it will take time to save that much, but the sooner you start, the sooner you’ll get there.

Having an emergency fund will help you avoid resorting to using credit cards and incurring new credit card debt if you ever stumble into difficult times, lose your job or incur an unexpected major expense.

Modestus Anaesoronye