One week to go! This time next week it will be “Happy New (Financial) Year” time but most people won’t be as excited as they will be on December 31. There’ll be no fireworks, no all-night parties and (probably) no New Year resolutions.
But, for anyone interested in improving their financial position, this is an excellent time to review your position and make the decisions needed to ensure that, by this time next year, your wealth is showing distinct signs of growth.
Step 1 is to list all your (real) assets and your debts. Focus on investment assets (property and shares) and cash but ignore lifestyle assets (cars, boats etc) as the latter are unlikely to increase your wealth. Your list of debts however should include all debts including credit cards and loans for lifestyle assets.
Next, review all your debts. Identify high-interest debts and make a plan to pay them off as quickly as possible and/or refinance to gain more advantage from the repayments. Don’t just add your credit card debt to your home loan without significantly increasing your repayments. Seeking professional advice to make sure you restructure your debt effectively is always advisable.
To help make extra repayments, you need to increase your income or reduce your expenses so that is the next step. Look for opportunities to gain additional income from your existing employment or business as well as the possibility of an additional part-time job or a new (online?) business. Also review your expenses to reduce these where possible. I realise that with imminent increases in fuel and pharmaceutical prices, this may be difficult but think creatively.
Make sure you use the extra cash wisely. Debt reduction is only one option. Directing your spare cash into an investment program may be a better choice for you in your circumstances – again seeking professional advice may be a sensible idea. Whether you favour shares or property, you can get started with relatively small monthly investments and reap long-term benefits.
And the final step is to periodically review how you are going. Simply repeat Step 1 and compare your overall position to measure improvement. Don’t expect massive changes in a short period of time but, by this time next year, the change will be positive.
So I’d encourage you to invest some time over the next week to –
- Make a list of all your assets and debts;
- Review all your debts to plan how to control them;
- Identify how to increase your spare cash; and
- Invest your extra cash wisely.
If you don’t have time to do that, make time to review your current priorities and consider where these priorities are leading you.