Ok, so it’s the beginning of the year and you’ve got all your fitness resolutions mapped out. Home workouts, yoga, pilates, joining a gym, training for a marathon, jogging every evening after work – your resolutions may include one or more of these.
Yes, physical fitness is really important. But is it the only important kind of fitness? Not so my friends. There is another type of fitness you should care very much about.
Financial fitness. When we think about growing fitter financially, the question is, what resolutions can we adopt to improve on not just our physical fitness, but our financial fitness too?
Try these 7 simple steps to a financially fitter you.
1. Backtrack before you Advance. Sometimes before moving forward, it is best to look back. Let’s start with a simple question, how much did you earn in 2014? To get this figure, just add up all your income, inclusive of salaries, rental, dividend income, even that couple of hundred ringgit you made from your side business or hobby, absolutely everything.
Then work out how much you saved and/or invested. The remainder, will obviously be the amount you spent. Try to identify major categories for the expenses. (Ballpark figures will do here, no need to work out the details down to the last sen!) ?.
2. Unveil the Budget. What, so fast? Supposed to come out in October 2015 right? Aha, no my friends, we are not referring to the national budget. We are referring to YOUR personal budget. And that needs to be done right now (don’t wait for the national budget!:-).
Look at last year’s list of expenses and the categories that correspond to those expenses. Then, try to link them to a 12-month timeline. You can assume (barring any major changes) that you’ll be paying for pretty much the same things this year, at pretty much the same times as last year. This should give you a guide as to what your monthly and annual budgeted expenses look like.
And, watch out for additional or one-off expenses that might come your way. If you already know what these are, note them down under the corresponding month, or if you don’t know when you might incur them, list them down in a separate column labeled “Anticipated expenses”. At least this will help you to keep them in mind, when you are debating whether or not to splurge on that latest gadget! ?
3. Lights, camera and…Action! So sorry, you are not being offered the lead role in a Hollywood blockbuster. Instead, the light is actually shining on your expenses, and the action here refers to the actions you are going to take, to manage your expenses this year. Put your thinking cap on and come up with actions you can take to improve your financial fitness.
Write the action items down on flashcards, notecards or key them into a note-taking app on your smartphone. Refer to them regularly in order to keep your mind focused on them.
4. Trim the Fat. Talk about multitasking – wow, this step could apply to your physical fitness too! ?. But that’s a story for another day – what we mean here is, trim the fat by cutting down on unnecessary expenses. You’ve heard of the lattte factor right. Well, giving up that expensive latte and substituting it with a healthier and cheaper cup of coffee made by yourself at home, will end up saving you calories as well as well as ringgit and sen! Sometimes we just don’t notice the lattes adding up…but they do!
5. Give and Take. Sometimes, we really struggle to give things up. It’s tough. Giving up something requires discipline and willpower. And let’s face it, not all of us have got either of those. So, how about this for a strategy – when you “give up” something, “take on” something else. For example if you’re giving up that expensive store-bought latte, create a pleasant ritual around making your own cup of coffee at home.
6. Plan the Work and Work the Plan. The truth is, you will not wake up one morning and find that your financial fitness has miraculously improved. You’ll need to draw up a financial fitness plan. Here’s how. First, compile all of last month’s bills. Then, hunt down those quarterly bills (such as property assessment invoices, management fee and sinking fund fee for stratified properties, etc) and your annual bills (car insurance, road tax, etc).
Next, get hold of a piece of paper or open a spreadsheet, and make note of all the different recurrent bills you receive, when the billing cycles and due dates are, and the amounts (if they are fixed for example, subscription to satellite TV services or your monthly mobile services bill).
Looking at this document, you’ll have a snapshot of your recurrent bills in front of you. At the beginning of each month/quarter/year, you’ll already know which bills to expect when. This will help you ensure that all your bills are paid on time, and help you budget your cash in hand better. Yes – it’s tedious and hard work – but you’ll feel a lot better after doing it.
7. Use It or Lose It. Let’s face it, many of us do not have the time to go through all those bills that we receive monthly, in detail. We receive the bill by post or check the outstanding amount online, and quickly make our payment (usually online as well) and then get back to our work. We don’t normally take the time to go through the bill line by line to see what we are being charged for.
Neither to do we check to ensure that the price we pay, matches the service we consume. For example, telcos, broadband and TV service providers change their packages often, but we may have missed the update amidst our busy lives. The result is the possibility that we may still be paying for an outdated more expensive package when there are cheaper options or other service providers with more competitive pricing, out there.
Or, we may be paying for “automated” services we no longer need or can do without. The golden rule is, if you’re not using it, lose it. Call up the service provider, get them to explain each line item in your bill to you, find out what options are available and look for ways to reduce your monthly recurrent expenditure on services.
Like physical fitness, financial fitness is a lifelong goal that must be worked on constantly. And like all endeavours we undertake in life, the more you work at it, the better you will get at it and the easier it becomes.
All the best for your financial fitness in 2015!