It’s that time of year again. Time to make resolutions for the New Year and decide how you are going to stick to them.
Your finances are no different. Do you want to increase your savings or diversify your investment portfolio? Do you want to be free of student loans or property debt?
Or do you simply want more income streams to build wealth?
To accomplish any (or all) of these, you need to set goals that can help you prioritise the essential and non-essential things in life.
Here are some to consider:
Basic life and money goals
- Buy a home
- Remodel or repair your house
- Paying down debt, such as loans and credit cards
- Find a new job
- Buy a car for your growing family
- Build an emergency fund
- Donate some of your fortune to charity
- Set a career goal: start a new business, expand a current one
Family-related goals
- Getting married
- Having children
- Saving college fees for children
- Leave the workforce (to raise a family, pursue a college education, help elderly parents)
- Helping newly graduated children with expenses
- Leaving an inheritance for loved ones.
Retirement-related goals
- Increase your retirement contribution
- Retire from working full-time or retire early
- Moving to different place (lower cost of living, closer to family)
- Pay your mortgage before you retire
Setting goals is one thing, but transforming those into reality is quite another.
Here are five ways to get started on your 2021 financial resolutions.
1. Join a support group
A support group, or finding your tribe, can be a great way to reach any goal. People can share information on personal finances to strengthen connections and build a community around shared financial goals.
MyPF’s My Personal Finances Facebook group, for example, allows members to share and discuss the latest updates on personal finances and investing.
Members can also ask questions on financial issues and healthy discussion is encouraged among members in a safe environment.
There are other options as well, including podcasts focused on personal finance.
Even if you aren’t having a direct dialogue, listening to experts discuss money can help keep you focused on your finances — and you may learn something along the way.
2. Understand your goals
If you do not understand how your financial goals work, you may not be able to achieve them.
Say you want to pay off your student loans, do you know how your plan will work?
Do you know the benefits of paying off the loan earlier and what to do with the money that is freed up? You could spend more on leisure or increase your retirement savings.
A solid understanding of how your financial strategies work can help in making smarter decisions. Read up on your loan to understand how it works.
3. Note your credit record and score
Review your credit score and check the scores from the Central Credit Reference Information System (CCRIS) report if you want to buy a new car or property.
A stronger score means a better chance your loan will be approved. You may need a credit report when looking for a new job or applying for insurance.
Individuals can request their credit information from the Credit Bureau. In the case of a business entity or deceased individual, the request can be made by the person authorised by the entity (for a business) or by the court (deceased).
The report can be obtained via eCCRIS, an online platform for users to access their CCRIS score or by visiting the CCRIS kiosk at Bank Negara Malaysia offices and the Credit Counselling and Debt Management Agency (AKPK).
Check for any incorrect information that could be a warning someone is misusing your account. Also check your scoring, on-time payment history and the amounts you owe, or your credit utilisation.
Your credit score also looks at how long your line of credit has been open, how much new credit you have been seeking and the different types of credit you use.
To build a good credit score requires discipline, and many have probably been financially affected by the pandemic.
Many would have taken advantage of the loan repayment moratorium and other facilities offered by banking institutions.
4. Keep track of each goal: Priority, needs or wants
Prioritise your financial goals, so you know which to tackle first. Divide them into critical, need or want.
A short-term goal to build up your emergency fund would fall under the critical category.
Allocate your income and manage your cash flow to ensure you have enough for other priorities after saving for the emergency fund. Replacing a car that is still running well is a want, and can wait.
5. Engage with a licensed financial planner
So, you have goals in mind but don’t know how to get started. Other than reading about personal finance tips on the internet, which may be inaccurate or really bad advice, consider consulting an expert.
A licensed financial planner can take a look at your current financial situation and devise better strategies to eliminate financial risk and build your wealth in the long run.
This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.