5 financial resolutions for a richer and brighter 2015
In a few hours, we’ll be welcoming the New Year with hope and enthusiasm. After all, it’s a chance to start our lives anew. We can pursue the dreams we may have left off, or perhaps start building something fresh and entirely different. The feeling that you are given a clean slate is exhilarating and exciting. It leaves you inspired to take on goals that we have yet to find the courage to start… until now.
For me, I want to go back to the basics of how I plan my finances. Like the building blocks that determine our overall wellness (such as healthy diet, exercise, sufficient sleep) how we handle our money is reflected by the manner in which we exercise its fundamental components. How much debt we have and how much we have for an emergency fund, along with our insurance and investment portfolio, make up the scaffolding of a prosperous financial future.
And so for 2015, I have five financial resolutions that may sound simple yet sensible and - more importantly - absolutely doable. If you’re getting started, then these are the steps you need to take for a brighter future. But if you have gone through these milestones before, you can upgrade your game plan and take it to the next level!
Are you ready?
1. Reduce or pay off debt.
When you are in debt because of mindless spending, the potential to grow your finances is held hostage. No matter how much you save, the interest from your bad debt will just keep piling up and cancel out what you managed to scrimp. So lessen that debt until it’s completely off your financial plan!
Level up: Be mindful of the kind of debt you are taking on, whether for your business or for a big purchase like your own home.
2. Set up the emergency fund that has to be worth 6x one’s monthly salary.
Even though its name sounds urgent, your emergency fund is not about spending it as fast as you have saved up for it. If you find yourself between jobs or hit by sudden ailment, your emergency fund must be able to cover such expenses. Sadly, a lot of us have to dip into our savings and investments or borrow from relatives, setting back our financial plans a couple notches down.
Level up: Already hit an emergency fund worth half of your annual salary? It’s now time to diversify your savings to investments, such as mutual funds and investment-linked life insurance.
3. Buy health insurance
Speaking of sudden ailment, health problems can be a big drain to your finances. Check-up, diagnostic exams, medication… the list of expenses when you are sick can be endless. Health insurance is recommended for everyone, especially for those who earn their own benefits, like freelancers. If your job provides health insurance, strive to find complementing health plans that can make your existing coverage more comprehensive.
Level up: Look for health insurance that can also stand as an investment, like limited pay policies with a return of premium after a certain period.
4. Buy life insurance, especially if you have dependents.
Sadly people sometimes only think of life insurance when they get older or sickly, by which time it is more expensive or no longer possible to get insurance. Take note, the best time to buy life insurance is when you don’t need it. The peace of mind that comes with being prepared for any possibility and knowing your loved ones will be ok if anything happens to you makes it worthwhile.
Level up: Have you explored the many varieties of life insurance? Aside from the traditional type, there is Variable Universal Life that combines life insurance with investment options.
5. Invest for long-term goals.
Most Filipinos put all their money in savings accounts. While a savings account is useful for safety and liquidity purposes, investing is necessary to make money work harder for you. Think about your long term goals and how much money you would need to fulfill them. Then find an investment product that can a) beat inflation – that is, provide you with a return on your investment that is higher than the inflation rate and b) grow over time so that you can accumulate the funds you need by the time you need it. There are target date funds available that can help you get your financial goals on time and on target.
Level up: When you have started to invest in your mid-term goals such as buying a house or going on your dream vacation, don’t rest on your laurels. Maybe you can start investing for your retirement next so you can be sure your retirement years will be a reward for your years of hard work.
With these five financial resolutions, I hope that 2015 and the years ahead will be a better and more prosperous year for all. Merry Christmas and a Happy New Year! – Rappler.com
Mylene Lopa is the Chief Marketing Office of Sun Life Financial Philippines.