How many times have you been guilty of setting the bar too high, and then failing miserably? Maybe that’s why most of us never stick to our New Year’s resolution.
But given that the start of every year ushers in hope, how about we be practical about this and look at what we can achieve by the end of the year?
Look, you don’t need to drive down debt to zero to make financial progress or land a five-figure job to have some semblance of social mobility.
Some simple twists and turns can help you make 2023a much better year than the last. Here, we provide five easily attainable financial goals anyone can do:
Pay your bills right after receiving your salary
One common budgeting strategy you will hear all the time is to take care of monthly obligations before indulging in any personal – or dare we say, luxury – expenses.
The logic is simple: doing so gives you a better sense of what you can truly afford and what you can’t. It also helps you avoid having a late payment reported to the major credit bureaus, which is one of the easiest ways to damage your .
So how do you get on the prompt-payment bandwagon? By using that auto-debit function, of course. And we recommend setting up two automatic monthly payments: one right after payday and another a few days before your monthly due date.
This is best for regular bills of the same amount, such as your broadband and mobile bills.
This second round of payment helps you avoid interest due to late payments. But here’s where you have to do some work: If you don’t know when your billing cycle begins and ends, just check your monthly statement.
As for fees, banks provide this service free for customers.
Tip: You could also request to change it to whatever day of the month is best for you.
And the major difference between direct debit and standing orders is: With the former, a variable amount of money is taken from your account while the latter allows you to set up the amount of money to send every month.
Focus on getting physically healthy
There is a huge correlation between physical and financial health. It’s a fact that Malaysia ranks top for non-communicable diseases (NCD) such as obesity and diabetes.
Non-communicable diseases like diabetes, cardiovascular disease, and cancer costs national coffers a whopping RM9.65 billion last year to treat some 40,000 Malaysians.
These NCDs also have a way of forcing you to adjust your lifestyle. Say for example if you are diagnosed with diabetes, outpatient treatment alone can easily cost you over RM5,000 a year and this is not counting the annual cost of unpaid leaves taken whenever you make that trip to the doctor. If you need to be hospitalised for long term treatment, expect the cost to go over five or six digits, from RM5,000 to RM50,000 or over RM100,000!
If you want to be cheapskate about it, then jog at the park. How much does that cost? Nothing.
Tip: Another incentive that can help put this in order is the lifestyle tax where you can claim, among others, gym membership and sports equipment amounting up to RM2,500.
Also, cut down on eating out. Malaysians are notorious for that, spending 13.4% of their income on restaurants and hotels. While eating healthy may cost some time and money, always indulging in that mee goreng or roti canai will seriously burn a hole in your pocket, if you live to tell the tale.
Get a side gig
Malaysia may be heading to better economic conditions but we are not in the promise land yet. What we learned from last year is that the country is and has been susceptible to external shocks whether it’s the election of Donald Trump as US president or the global oil price movements.
There’s no better way to hedge yourself against these uncertainties but by generating some part-time income. There are many ways to do it. You could either go the usual route of working in an F&B outlet or you could also monetise your car and drive for a ride-hailing service.
Now, we are not advocating crazy hours but a side gig that’s worth your time and where you can make that trip back home count by cashing in on a trip.
Have a sizeable following on Facebook or Instagram? Then get your hands dirty with being an influencer.
The point is, a side hustle helps mitigate the risk of unemployment or unpaid bills should something untoward happen. It also increases your spending power and savings because of that extra income. Just remember to not take up something too taxing that your full-time job is affected: this is a part-time stint after all.
Repay 20% of your credit card debt
Something eventually has to give and you’d much rather that be your outstanding balance paid down on your own terms, than your ability to afford monthly minimum payments and, in turn, your credit score. So get serious about getting out of credit card debt.
Now, we know owing zero is a tall order, let’s start with shaving 20% of your credit card debt. Steps to take include budgeting and automation. To optimise the entire process you could use a credit card payoff calculator to crunch the numbers and if you can afford higher payments, by all means make them.
The biggest, and also the most difficult part of paying down your credit card debt is to refrain from putting on more debts while you are paying it down. Keep your card at home for emergency, so you won’t be tempted to use it for unnecessary things.
Because the sooner you can reach debt freedom, the better off your wallet will be.
Tip: Consider credit card balance transfer facility to help you manage your credit card debt without incurring interest.
Add one month’s pay to your emergency fund
Like someone without insurance, people who lack an emergency fund are tempting fate, putting themselves at risk of financial catastrophe in the event of unexpected unemployment or major medical expenses.
So building up some reserves should be one of the first orders of business for any financial makeover. While there’s no rule of thumb as to how much you need to build, some recommend a reserve of six months.
But it’s important to understand that won’t happen overnight. In other words, you don’t need to put the rest of your financial life on hold until your emergency fund is complete. Rather, chip away at it over time.
Tip: This is the best time to use auto-debit to transfer a set amount of your income every month to a high interest account for emergency fund.
Just remember to scale
The problem with all these New Year’s resolutions is that we set the bar unreasonably high. Now, halfway through the year you may look back and wonder what you were thinking! It’s fine if you don’t meet your financial goals, but you have to at least attempt to work on them.
One way to do it is to set achievable goals such as trimming off 20% of your credit card debt. That is reasonable and doable and by the end of the year, achieving that will free up some money.
To make it more manageable, you can also split your target into quarterly, so you can have a review every quarter to see if you are on track.
If midway you get stuck or lapse into bad habits, quickly get back to it, rather than let your resolutions slide into oblivion. And should you face dire circumstances, always ask for help.
If that credit card debt becomes unsustainable, get in touch with your bank to negotiate repayment or freeze your card. If overall debt becomes unmanageable, get in touch with agencies such as Agensi Kaunseling & Pengurusan Kredit (AKPK) for professional help and guidance.
Regardless of where you are on the personal finance spectrum, remember to make 2023 count by working towards – and hopefully achieving – some positive financial goals.