Here are a few tips from financial experts, to help you get back on track (or on track in the first place!) with your financial wellness…
1. Prepare a budget
Where are you over-extending? Do an honest expense report for yourself. Keep all credit card bills, all receipts, and any other documents linked to purchases. Then, sit with all your bills and map out a realistic plan of your needs and wants, and decide what can be afforded with your monthly income.
If you do not want to face any money problems later, try to stick to that budget and avoid unnecessary purchases. Also, keep good financial records, so you’ll be able to keep track of your financial situation.
2. Plan for the recurring big-ticket items
Every year, insurance is due on the house and car; cars needs servicing every few months; school tuition is due at the start of the academic year… the list goes on.
Many big-ticket items are due on a regular basis, and if you do not prepare for them, they can punch a big hole in any savings plan you might have had.
Note down exactly what is expected and the timeframe for it, and put aside a sum of money in the months leading up to it.
3. Be wary with loans
If you think that even if you save, you still won’t be able to afford that thing (whether it’s a house, a car or even tuition) and the only option you have is to take a loan, don’t be hasty.
Although your bank or credit union may be offering you the world, you don’t have to take it. Borrow at little as you need, and take some time to shop around for the lowest interest rates and fees, and early prepayment options.
4. Make sure to have a ‘cushion’
Financial experts recommend to put away at least six months of your salary, just in case something unexpected happens that may jeopardise your job.
You don’t want to be scrambling to make ends meet the moment you get the pink slip. Granted, job loss can be devastating, but it will be a little less scary if you have some funds put aside. It will also ease the pressure at the office, as you know you have your ‘house in order’ just in case.
If you have no ‘cushion’ at all, then now is a good time to start!
5. Automate your savings
Set up a standing order for the end of the month (or whenever you get paid), so that before you spend a single cent, you will have put away at least 10-15% of your income into a separate savings account. If you can, put any bonuses or lump sums into this account too.
That way, by the time you visit your ATM to pull money out of your account, you are only seeing the money you already budgeted to spend.
6. Get tax advice
In Trinidad and Tobago, some purchases that are tax-exempt or subsidised. For instance, new homeowners can apply for a reduction in tax for several years, and some financial institutions offer products or plans that help reduce tax.
If you are not so good with numbers and finances but you want to learn how to achieve financial wellness, then you should ask for help and get some tax advice from a professional.
Always remember that money grows by proper planning, not only by saving, so if you realise you don’t know how to carefully plan your income, don’t be afraid to ask for help.
7. Limit the entertainment overdose
Eating and drinking out are the reason the old catch phrase was coined: to have “too much month left at the end of the money”. Only commit to things you can afford, and don’t say yes to things just because you are invited.
Remember less is more. Need all those cable channels, or is Hulu or Netflix a better option? Need that gym membership if you only go once a week? Look for cheaper alternatives; how much is a drop-in exercise class?
What about daily expenses? Buying a fancy coffee and lunch at a restaurant every day will soon add up to an empty wallet halfway through the month. Online shopping provides glorious retail therapy from the comfort of your home — or office! — computer… but do you need all these things?
A few small changes can make a big difference.
8. Pay off debt
Always pay your bills on time. First of all, you should know how much you actually owe, then you should understand how much you can actually afford to pay each month and then stick to your budget, no matter what.
Don’t be discouraged if you realise that after you pay all your bills, you won’t have so much money left. You will be able to achieve financial wellness by balancing the money you earn with the money you owe.
Sometimes, consolidating all your debt can help a great deal to structure your loan balances. Visit your financial institution and ask about this possibility.
9. Plan for retirement
Think about your future and ask your employer to help you with a retirement plan. Remember, in thirty years, a dollar will be worth less more than it is worth today due to inflation.
Instead of just thinking about “saving” money, consider “investing”. Many insurance companies and financial institutions offer investment products, and from time to time there are Initial Public Offerings (IPOs) that may be a good investment. If you are not sure about these, seek the assistance of a financial consultant who can explain them to you before you take a big risk that you might regret.
Anyone can achieve financial wellness if they are willing to make some sacrifices in order to reach their goals.
Take control of your financial life and be more responsible!