Welcome the New Year. As we look back on a challenging 2014, we hope and wish for improvement in our financial wherewithal, personally and nationally, during 2015. Ultimately, our country is represented by the sum of our collective financial efforts and attitudes.
Individually, citizens can ably support our island’s economic recovery by pursuing personal financial independence. The dawn of this New Year is our opportunity to commit to resolutions which will improve our personal financial position. The result of such efforts will collectively represent a move for our country further away from attitudes of national mendicancy.
So, let us consider nine resolutions for the new year:
1. You must resolve to plan. Truly, it is said that to fail to plan is to plan to fail.
Your plan should be written in as much detail as possible. This way you are forced to think through the expected events of the forthcoming year and to examine carefully your personal goals in life. It will also reveal why you may need extra funds during this year or in future years.
Your plan should be reasonably challenging and ambitious. A wimpy plan will not provide the excitement and motivation that is essential for helping to maintain healthy financial discipline. The plan should show the amount of your expected (budgeted) income, spending, saving and investing for the year.
Write down your plan
Yet, in addition to the numbers in your plan, it would be useful to write about how you expect the future to unfold, the people, the events and the activities that are represented by the numbers in your budget. This narrative will be extremely important in comparing your expectations with what actually happens as the year progresses.
2. Resolve to invest at the highest interest rate that your risk tolerance can handle. Certainly, make regular checks on the level of inflation and ensure that you are earning in excess of that. Another caveat is that you should be careful that the liquidity of your investment suits your needs for cash.
3. In the same vein, set up your retirement fund, preferably with tax-deferred savings. Resolve to continually contribute to your retirement fund.
4. Resolve to read and explore more information about personal finance, financial institutions and their products; for example, your credit union and your bank. Build a close relationship with the managers.
5. You should strengthen your relationship with your insurance broker and review your personal and general insurance annually. Many brokers are trained financial advisors, so you may be able to draw on this resource for guidance.
6. Resolve to maintain proper financial records. Prepare a listing of your assets and liabilities and their terms and conditions. Also, you should maintain a list of names and telephone numbers of important contacts in your financial plan.
7. Maintain clear and comprehensive property and income tax records. Resolve to keep your tax reporting up-to-date. Tax planning is fundamental to wealth accumulation. So, if this is a new topic for you, seek the best possible advice now, as the year begins.
8. The penultimate resolution is to hold on to as much of the income that comes your way during the year ahead. Wealth is about having funds much more than about conspicuous consumption. Resolve to control your spending and consumption.
9. Resolve to review your performance on an ongoing basis. Be kind to yourself. It is better than it may look at first. If you keep on track with planning and reviewing regularly, eventually your finances will start to fall in place.
Happy New Year to you and your family. Best wishes for peace, good health and prosperity.
• Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances. This column is sponsored by the Barbados Workers’ Union Co-op Credit Union Ltd.