EVERY year, we are setting life goals and, maybe you are like me, also setting financial goals.
It’s a good time to start tracking our income and expenses so we can have wise decisions moving forward. Given that we are experiencing a pandemic, we need to align our financial behavior with the environment and for us to achieve our goals.
Regular assessment is important in financial planning. Managing our finances requires an honest look at our habits, biases, expectation and actual cash inflow. I’m sharing some steps to improve our financial health this 2022.
1. Examine your income and expenses.
One of the major focus of our assessment is the spending habits that we have. Do we spend in accordance to our needs and with budget on our wants; or do we exceed our income because of unnecessary expenses? Once we established the aspect of spending, we can now look at our cash flow.
The money that comes in can be fixed if you’re an employee or, if you’re an entrepreneur, it could be variable; but at least with a projected amount. Through income-and-expense tracking, we can see the bigger picture if we need to increase our cash-flow by having a side income.
Maybe we can lessen our expenses so we can still have surplus at the end of the month and eventually for the whole year.
2. Create an automated savings plan.
Building our savings is a matter of habit. If we are really having a hard time setting aside a portion of our income, why not automate it?
We can do this by opening a savings account and applying our payroll account to auto-debit arrangements. In this way, the amount that you want to save will be deducted every month.
3. Start/review your investments.
If you are planning to start investing, it is wise to start early. You can check financial products that are suitable in your needs in institutions such as banks, insurance companies and brokerages.
If you’re a seasoned investor, you may assess opportunities around that can help you achieve your short term or long term goals. As we start the year, if you have a surplus from 2021, it may be a good time for you to position additional investment funds.
4. Check your insurance portfolio.
This pandemic made us realize the importance of getting protection, especially with the uncertainties of getting sick.
Health insurance plans can help us be cushioned from the expenses due to medical needs. This way, we can protect our savings and investments from being depleted. The way to build our target retirement or educational funds is to have adequate protection, especially if we have dependents in the family.
If you’re a parent, getting insured is a way to prepare the financial future of your family.
5. Start monetizing your passion.
Creating another source of income will help you have a more flexible budget for your family and love ones.
For example, if you’re an employee earning around P80,000 a month and you found out that your passion in baking can be a source of P20,000 a month, you can have an extra amount that is a fourth of your income for other goals. May it be buying a car or blessing your parents and/or friends who are in need of help this season.
This time we need to be creative to maximize our talents also and be productive during our free time.
With the rising cases of the new Covid variant, we need to be diligent, plan ahead and, of course, prioritize our health. We can always say that health is really wealth.
If we are not careful, our investments can be put to waste with just a sudden health issue. Above all this, we are all hopeful that our economy will recover soon and we can go out with peace of mind.
Do not be overwhelmed by what’s happening but take small steps with the things that you can control may it be in your family, work or business. Together as a nation we will thrive and make a difference in our community.
Karlo Biglang-Awa is a registered financial planner of RFP Philippines. To learn more about personal-financial planning, attend the 93rd RFP program this January 2022. To inquire, e-mail info@rfp.ph or text at 0917-6248110.