“Discipline is just choosing between what you want now and what you want most”
New is the year, new are your aspirations, new are your financial goals, and new are the hope. Since we are still at the beginning of the year, most of us are still starting to plan or reorganise our wealth and health to be better than last year.
With each passing year, we become a year older and should be wiser, wealthier and healthier from last year.
Therefore, let’s discuss how we can construct this new year to be better, wiser and meaningful.
Personal finance reflection
The end of the year marks a threshold and invites a pause for reflection. It’s a great time to look back at the previous year and look ahead.
Each year, this will be a good time to evaluate what we have done during this past year. We always say “forward looking” is the key to success but in order to create the future, we must first look back and identify our strengths and weaknesses.
Some questions to ask to reflect on what went well for my finance would be; How did my assets perform? What was the best decision? What is not working?
Let’s walk purposefully, with clear financial goals into the new year, guided by thoughtful insights from the past.
Regardless of what stage in life you are in, you are likely to have some short and long term personal financial goals.
Setting tangible and realistic goals, following them, and tracking your progress is the key to success in achieving financial well-being.
Setting financial goals can also help you to keep the big picture in mind rather than getting bogged down with day-to-day expenses. In addition, it’s easier to avoid impulsive purchases.
Track income and expenses
It is really important to keep track of your total income and how you are spending your money. It is the first step to understanding how you are managing your money, and taking control of your finances.
The real reason for you to track your expenses is to create financial awareness. If you don’t know where your money goes or how you spend it, you won’t know what habits you can change in order minimise leakages or wastages.
Emergency situations arrive uninformed and need immediate action. There could be a setback to one’s earning capacity due to a temporary disability.
There could be a job-loss, unexpected home repairs, car repairs, unexpected travel and others. Emergency fund is not about meeting your planned goals, but only to act as a safety net.
Stop creating debt
When you have a lot of liabilities, it can be challenging to make any real progress on your wealth.
Forget one payment and you’re hit with a late fee and perhaps even a penalty rate, sending you deeper into the debt hole.
This alone won’t get you out of debt, but at least your debt won’t get worse. When you continue adding debt while you’re paying it off, you won’t make much progress.
A financial plan acts as a guide for your financial journey.
Imagine yourself trapped in a maze filled with twists and turns, blind alleys, and dead ends.
It would be easier if you had a map and compass to guide you. Your financial life can be a maze, and a personal financial plan is the map and compass that can help guide you through that maze.
Financial plan helps individuals and families reach goals that require money to achieve, such as having adequate retirement income, children education fund, tax planning, insurance protection, wealth distribution and others.
With good planning, most people find that they can achieve their desired standard of living and meet their financial goals in a timely manner.
Engage a financial planner or advisor
A good financial planner is one who has the expertise to help you meet your financial goals. It’s difficult to be unemotional about your own money.
That’s the real purpose of having a financial planner or advisor. You don’t hire a financial planner or advisor because you’re not smart enough to do this yourself, you hire one because they’re not you.
When looking for financial planner or advisor, choose one who could give you advice and prioritises your interest first.
Financial management, just like the physical or mental kind, takes time and effort. It doesn’t happen overnight.
You don’t have to understand everything about personal finance at once. No matter what your past financial life looks like, recovery is possible.
When it comes to managing money, feeling a sense of power or control over your situation is crucial.
A good way to start is to stop beating yourself up over your past money mistakes and move forward. Lastly, I wish you all a great year ahead and Happy New Year.
Gunaseelan Kannan, a licensed financial advisor by Bank Negara Malaysia and a licensed financial planner by Securities Commission (CMSRL/B4198/2013), is currently pursuing his PhD research on financial planning and financial technology. He also lectures on accounting, finance and business fields in Asia Pacific University of Technology and Innovation (APU). He is the Malaysian Financial Planner of the Year 2018 and 2019 Award winner (1st Runner Up), from Financial Planning Association of Malaysia. Email: [email protected]