If you’re determined to start 2011 off on a sound footing, here are four goals worth setting this year.
- Put a financial plan in place
Unless you have a financial plan down on paper, complete with goals, specifics and, yes, some built-in rewards, too, to sweeten the deal, chances are your good intentions will go up in smoke. If you don’t know how to budget, find someone to help you — now. It’s not enough to say, “This year, I’m going to pay off my debt, refinance my home and save R5 000.” You need to show exactly how you’re going to do this, month by month: what it will cost you, what you’ll have to save, and where you’ll have to cut back to make it happen.
- Repay your short-term debt
There’s nothing worse than starting a year without knowing how and when you’re going to settle your debts. Whatever your financial goals, repaying debt should be your number one priority. Settle high-interest debt first — store cards, your credit card and any loans you’ve taken out. Assess how much is owed and how much you can afford to pay monthly, over and above the minimum monthly requirement. The sooner you are free of short-term debt, the sooner you can focus on longer-term plans: saving, paying off your bond and so on.
- Build — or rebuild — an emergency fund
No matter how carefully you budget, you’ll always need cash for something unanticipated. Maybe your car will break down, your laptop will crash, or you’ll fall ill and your medical aid won’t cover all your expenses. Be prepared by prioritising an emergency fund. Ideally, you should have about R20 000 you can get your hands on easily if and when you need it — but not so easily you’ll be tempted to blow it on a holiday. Don’t use your credit card as a ready-made emergency fund — we’re talking cold, hard cash here.
- Save — and invest
Budget to save — that is, get into the habit of putting a little each month into your savings, no matter how small. Every R100 adds up. Even if you’re repaying debt, you should still be able to find something to squirrel away. Once you’ve paid off high-interest debt and your savings are on track, consider investing in a growth asset that will beat inflation over time. If you don’t have a financial adviser, kick off your investment plan with advice based on your goals and appetite for risk here: www.investonline.co.za.
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