The festive season is over and most of us are back to work and real life. What do your goals for this year look like? Setting tangible and realistic goals is an important step toward becoming financially secure. If you haven’t set them, it is time to do so. Here are some pertinent questions to ask yourself as you do so.
1. How will your income increase? It’s okay to write down how much you will save or invest but how will this get done if you are not planning to make more money?
You cannot grow financially by constantly earning the same amount of money year in year out.
You may be earning a salary and believe that this is not in your control. After all it is your employer who decides. Look at the role you are playing at work.
What do you need to achieve to earn more? What targets need to be met? What value can you provide? What opportunities exist for you to go the extra mile? Have a strategy for your job so that an increase or bonus can be justified. Income can also be increased by putting a skill you have to good use.
Maybe you can cook, paint, bake, write, sing... Perhaps it’s even things you have been doing for free for friends and family. You can also do certain investments that can give you an income.
2. What assets are you building?
Too often when we start a New Year, people give vague statements about how they will save or invest more. Look at your portfolio and decide what it will look like by the end of the year. Do you intend to invest in shares, land, business, bonds, among others. Here is the trick with assets. Start learning, doing the research and reading even before you buy it. You become an investor first by acquiring an investment mindset. More money doesn’t necessarily make you an investor. If you want to own land, spend your weekends visiting various areas. If you want to start a business, learn what it takes to run a business.
3. How will you get out of debt?
Look at your loans and make a plan to reduce or eliminate them. There’s only one way to get out of debt. By paying it back. So the more important thing to figure out is where to get the money to pay it back. Avoid borrowing from Peter to pay Paul. Make a mental note to not borrow especially for consumption purposes. Leave that credit card at home. Cut back your expenses and use that to pay off your loans or as I have already mentioned, figure out how to make more money. Some of us may not be feeling much strain over our debt. You may be in what I call comfortable debt. You may have a car loan, business loan or mortgage that you are servicing without much headache. However, if you lost your source of income it would be a problem. So while you are in a fairly stress free place, commit to reducing this debt as much as possible.
4. Do you have an emergency fund?
If you lost your source of income, can you survive three to six months as you look for another job or figure out your next plan. If not, create one. This can be as simple as a separate savings account. Over time, build it to have enough funds to sustain you for that period or even more. So if spend Sh100, 000 per month, aim to have three to six hundred thousand shillings in that account. Apart from sustaining your life, there are other emergencies this fund can be used for. Your car can get hit or a medical situation in the family not covered by insurance. This fund will stop you from borrowing to cover these expenses. Any time you dip into it for these emergencies make sure you replenish it.
5. What key life events do you need to be prepared for?
Everybody will retire at some point. It may not mean you will stop working completely but you may slow down. What pays for college education? Decide which investments will intentionally go towards these events. You may need to take care of your parents at some point or have a medical situation. A life event that we will also all face is death. Can your financial information be accessed by family members? Maybe it’s time to write that will.
As you write down the answers to these five questions keep note of the actions that need to happen. Let your finances become an intentional part of your life this year.
Waceke runs programs on Personal Finance and Entrepreneurship. Get in touch with her on [email protected]
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