As the end of the year draws to a close, it is good to reflect on the past year and dream about the next one. We are so busy during the year that reviewing our goals or planning does not seem to happen. Someone recently told me that he is only going on leave once his planning for next year is complete. He was referring to his work, but imagine if we had the same attitude towards our personal lives. Somehow our personal planning falls by the wayside, and as the year draws to a close, I encourage you make time to reflect on 2014 and plan for 2015.
1. Set goals
Studies have found that by writing down our goals, even if we never review them, we have a 30% chance of achieving them. If we review them and work on them, we have 60-70% chance of achieving them. By writing down our goals, our brains are set into motion and we start to process the goal and the different ways of achieving them.
It is easier to say no to additional spending, if we know what we are saving towards, be it our child’s education or our retirement. By setting and writing down our goals we are making conscious choices in our spending. We are choosing to save for our goal rather than to spend. By setting goals and sticking to them we are taking control of our finances.
2. No debt
On average, people spend 12-18% more when they buy on credit than when they use cash or debit cards. Why, you might ask? By doing MRI scans researchers found that when we spend cash our brains send out pain signals; whereas when we spend on credit those same signals are not activated.
Only 22% of Americans pay off their credit cards at the end of the month. If we follow a similar trend, only 2 out of every 10 of us pay off our credit cards monthly. If this is the case, many of us are paying a lot in interest fees! This money could be better used toward saving or paying more on our bond monthly.
3. Save
Wise people save. They know there is always an emergency be it a new set of car tyres, an unplanned medical expense or a broken kitchen appliance. By saving upfront we live in credit and not in debit. We spend what we have without having to rely on credit.
If we have not saved for a long time, it is difficult to get that saving muscle going again. So whilst you are discussing and planning for next year, build in a saving component. Look at your budget and set some money aside to save. I advise people to start by saving 10% of their gross salary and increase it over time. I recommend 2% towards emergency savings, 3% long- or medium-term savings and 5% towards retirement savings.
By saving you are “paying yourself first” and you are making sure you have enough for tomorrow.
4. Give
Another muscle that atrophies is giving. Somehow it is the first area we cut when we revisit the budget. It is the first area we neglect. But yet we have so much to give to others. I remember reading years ago that the gap between rich and poor will just get bigger and that is true today. If we think we are not rich, we are sorely mistaken. If you have a tertiary education, have a car and have travelled abroad, you are in the top 5-8% of the worlds’ wealth. Give to others, it serves the community and humbles us. It brings balance in our budget and spending habits.
I hope you have a restful, relaxed and restorative Christmas season and look forward to working with you in 2015.
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