BY JOHN ELLIS, FINANCIAL ADVISOR
The first week of the new year is about to end with many families wondering what the year will hold for them financially. This new year as with all previous new years brings both challenges and opportunities. It can, if we wish, be an ideal time to re-evaluate and enhance budgeting and debt management strategies.
Of what value will it be to bury our heads for the next few weeks as the Christmas bills begin to arrive? So, lets look at a few practical ideas and methods to help us and our families to achieve financial stability and peace of mind.
Before diving into specific budgeting techniques, take a holistic view of your family’s financial situation. Evaluate your income, expenses, outstanding debts and most importantly your goals for the coming year; have a goal in sight! Identify areas where you can cut costs and set realistic financial goals for the year.
This initial work will help you to budget effectively. Use the Competition and Consumer Protection Commission website for handy checklists – debt checklist, financial planning spreadsheet and a very handy spending calculator – all to be found at www.ccpc.ie.
When it comes to a well thoughtout budget it will include all aspects of your family’s life with a mixture of fixed and variable expenses. Don’t forget to include savings as a non-negotiable expense. Allocate some of your income, be it ever so small, to an emergency fund, an education fund, and for retirement savings. Consider using budgeting apps to streamline the process and gain insights into your spending habits. Use the MABS online app, My Budget. The tool will help you to work out how you are spending your money so you can compare this with your income and MABS will not see or keep any of the information you enter into the tool.
Tackle your ‘high-interest debt’ first, as for many families’ debt is a significant burden. Pay off high-interest debt such as credit cards and store cards, as they can accumulate quickly. Consider combining debts or negotiating lower interest rates with creditors.
Look at a term loan, but if going down that road cut up your ‘paid-off’ credit cards. You know what can happen if you don’t! Then redirect any extra funds, like tax refunds or work bonuses, towards reducing outstanding debts. Your progress will be slow at first but by staying committed your debt repayment plan will work.
Unforeseen expenses are part of life, so establish and maintain an emergency fund which is crucial for financial stability. We all know how easy it is to fall behind for whatever reason so aim to save three to six months’ worth of living expenses. This fund will act as a safety net, providing a buffer during unexpected events like medical emergencies, car repairs, or job loss.
And, if the unwanted happens, be wise in the use of your pot of money. Don’t give all your money to the one who shouts loudest – manage the ‘damage’ and speak to your creditors remembering they are human too and in the main are not beyond being sympathetic.
Use your experience to teach your children about budgeting, saving, and responsible spending. If old enough and for the right reasons, consider involving your children in family budget discussions, making them aware of the importance of financial planning from a young age.
So, as you embark into the unknown of a new year make financial literacy one of your goals embracing smart saving and investing. Consistently review your budget and as you look back next year you will see 12 months of financial well-being and increased prosperity for your family!
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