Many of us have a bad relationship with our money. We might make enough money, but we don’t give what we do with it a lot of thought; if we have a bit left over at the end of the month, we stick it in a bank account and never think about it again, until we need it for a new car, a dental treatment, or a family emergency.
Make 2017 the year that you decide to do right by your money.
Budget properly. Sit down and work out what’s coming in and going out. Be careful of small everyday cash spend – a cup of coffee a day can add up to quite a major sum over the course of the year.
But to do the right thing, you need to do more than just budget for monthly income and outgoings; you also need to think about your longer term financial objectives – having a good holiday, buying a house, retirement.
How much do you need to save, and are you on track?
Pay off expensive debt if you have any. It’s easy to run up bills on credit cards, but having a debit balance is an incredibly expensive way of financing your lifestyle.
Even if you can only pay a small amount more than the minimum every month, you’re chipping away at the debt. If you can pay off the whole balance, you’re saving a huge amount of interest.
Save those odd extra pesos. Regular savings are a particularly good way of building your nest egg, whether they’re going into a savings account or into funds.
If you can make the process automatic, it will be easier to make sure you save every month – though you do need to budget so that you don’t end up going short if there’s not quite enough money in your account one month.
Maybe you already invest in funds or shares, but you haven’t looked at your portfolio for a while. 2017 could be the year that you decide to monitor your investments regularly.
If investments haven’t performed well, it could be time to chuck them out, unless you’re sure the reasons you originally invested are still valid.
It can also be a good idea to run a Google search for news on your investments and check whether you’ve missed anything, or track down the latest research – or even get round to reading those circulars that you’ve been carefully putting on your desk and then ignoring.
Look at your portfolio in percentage terms. If you’ve made a big success of one investment it might represent a huge proportion of your total wealth – it’s time to re-balance.
Sell a little to reduce your exposure – you don’t have to sell your entire holding – and then invest the proceeds in something new.
Do you keep adequate records? You may keep records that satisfy the tax man, but do you write down why you made a particular investment and what your objectives are?
If you don’t, will you be able to remember in a few years’ time? Keeping a financial diary, whether it’s at the back of your organiser, on a computer or written in a separate notebook, is a key step to managing your financial affairs better.
A good investment can be ruined if the cost of managing it is too high. Cut the cost of your investments by assessing your service providers. Set the service they provide against the costs, and review other banks and brokers to see if you can get more for less.
CMC Markets, for instance, provides a wide range of trading services at keener prices than major banks charge. As with monitoring your portfolio, reviewing your costs should be something you do on a regular basis.
Finally, remember what your money is for. It’s not an end in itself – it’s there to help you live your life.
All your budgeting, savings and investment should be driven by your long term goals, whatever those happen to be.
And while budgeting is a good discipline, no one’s going to forbid you to splurge occasionally – as long as it doesn’t break the bank!