Thoughts on adopting and maintaining better money management habits
How have you been faring through the last 48 days of January? Keeping your head low because your pocket is empty or carrying on with life as usual because you don’t have any money problems? Not to worry, we still have 24 more days to the end of January and payday is around the corner! You will be fine, eventually.
The first month of the year is usually the longest for many people (we joke about the uncountable number of days in January) as it is the most financially tasking. This is because many companies pay December salaries by the middle of that month to enable their staff to meet the financial expectations of the holiday season. By the time the New Year arrives, many find they have overspent and are ill-prepared for January. Those who also have periodic financial responsibilities early in the year such as house rent and school fees are especially aware of this.
Financial planning is a skill and not so many people are adept at managing money. Think about it. For many people who find themselves skint in the New Year, it would probably not be their first time. One would assume that experiencing this situation once would be the motivation for ensuring better planning and prudence for subsequent years. But many of us just go ahead and repeat the cycle over and over again.
The average person has a cogent reason: the cost of living keeps rising and income usually does not rise proportionately. Fair enough but if one knows this, does not it imply that one should manage their money better? It can be hard with all of the temptations that come with year-end festivities, so what is the way forward?
Everyone wants more money and many people never seem to have enough of it despite their best efforts at acquiring it. We often focus on finding means of earning more money to improve our lives. This means that people would focus on having a side hustle for example which brings in more money. What many people do not often consider is planning their income, adjusting their expenses, saving, and ultimately investing. It is not always about acquiring new funds, we also need to consider what we do with the funds we currently possess.
Planning your finances helps you understand how much you have available to fund your financial responsibilities and lifestyle, and how you can apportion your income to match your needs and wants. It helps you understand whether you have an income problem (you do not earn enough) or a money management challenge (you are not managing your money properly). You can better address your financial issues when you identify what aspects of your financial life you need to address.
Another December will arrive and you may find yourself repeating this cycle. Maybe it’s not even a once-in-a-year situation for you because you are always looking for how to meet your financial obligations. Well, no time like the present to begin to do better. Here are some things you need to keep in mind:
- Identify your financial commitments (rent, utilities, fees, statutory payments, etc) and the frequency of payments (weekly, monthly, quarterly) then match these with your income. Are there any gaps? What do you need to do to fulfil your commitments?
- Review each of your commitments. Can you cut back on some of your expenses? Can you renegotiate payments or the timing of payments? How creative can you get with this?
- Living below your means also helps you keep more money away for a rainy day. You can afford some things but you can also choose to either go without or reduce the quantity of the items or the tendency to acquire them.
- If you acquired debt during the holiday season, ensure you stick to your repayment plan. If you have skipped a payment or need help in adjusting your repayment plan, do ask for consideration. This is better and more honourable than ghosting your creditor.
- Put a bit of money away in savings for investment or even a rainy day. Do you know you can even have a Detty December fund? Put a little away monthly and have a lot in December. This requires some level of discipline so you have to ensure that you make it tough to access these funds.
- Saving money is good but with all the economic issues going on now, investing is better. You have to find which investment vehicle works best for your objective. Many of us want instant or huge benefits but often, the products that provide these benefits could be fraudulent. You have to think long-term and the best way is to find a professional who can give tailored advice based on your unique needs. Some available options include stocks, bonds, mutual funds, and even your pension plan. Other options could be investing in a business or loaning out money with interest.
- If you get promoted this year, receive a bonus or salary increment, or even get some unexpected inflow, do not be in a hurry to upgrade your lifestyle. It is easy to remember all the things we need or want to spend money on but one must always consider the scale of importance. Remember to think long-term as you plan for that windfall.
Achieving financial freedom starts with taking the first step in managing finances better. The goal is not to get perfect at managing your money, rather it is to build consistency. Remember, your financial position will only get better when you become better at managing your finances. As many of us are clueless about money management, asking for advice is also very key. This is because there are people whose responsibility it is to do all the research necessary to make your money work for you.
Another payday is around the corner, and the temptation to carry on as before is very much present. What are you going to do differently? The future tomorrow that we desire starts from the one we create today. We all want more money but sometimes, it is not so much about how much we earn, rather we should also focus on how much we keep. This is the way I see things today.