How to get your financial resolutions back on track
While many ditch their New Year's goals within weeks of making them, here are five tips to ensure they last the whole year and beyond
At the start of the year, many of us made a mental checklist of how to change our behaviour for the better. One of the most popular resolutions is to balance our finances more effectively, either through a reduction in expenses, saving more or investing more frequently.
According to a 2018 financial literacy survey of 600 UAE residents by Visa, more than two-thirds of those polled (69 per cent) aimed to begin or continue saving money at the start of the year, while more than half said that they would like to invest more to improve their finances in 2019. However, with many resolutions already on the back burner, here are five actions to ensure you make them last throughout the year.
1. Draw up a budget
Good financial planning begins with a basic household budget - essentially a spending plan that helps you determine where your income should be allocated each month. Three-quarters of those surveyed already have a budget and it should be a fundamental priority for all as your budget is the foundation on which to base all other financial goals.
2. Put your savings aside from the start
Save as soon as you receive your pay cheque because once you commit to a savings plan, achieving your monthly investment and savings goal becomes easier. According to Visa, 92 per cent UAE residents save money, with almost six in 10 using a savings account and 57 per cent building up a balance of money in their bank account. The easiest way to save is to ‘pay’ yourself first - that means setting aside a certain amount each month and keeping it in a savings account. By making it a regular habit, you will ensure you hit your saving goals.
3. Track your daily expenses
This is the spending you have control over and can adjust if necessary, which is why it is important to track it very closely. According to the study, only 35 per cent of UAE residents do so diligently. Since daily expenses include discretionary items such as new clothes and entertainment expenses, such as eating out and holidays, noting what you spend on will help you manage your outgoings more effectively.
4. Invest for the future
There is no better way to save than investing for your future. Whilst 32 per cent of those surveyed believe in investing more for their retirement, only 22 per cent are actively doing so. The smartest way to do this is to set up a regular process by which you can invest your money. Choose an investment strategy that works for you and stick to it. Reviewing your plan at least twice a year is essential to ensure that your money is growing.
5. Use credit wisely
Learn how to borrow sensibly to reach your financial goals and how understanding your credit score is a crucial step towards it.
To help you achieve this, download your credit report from Al Etihad Credit Bureau app or visit aecb.gov.ae. This will offer better visibility on your credit history and credit worthiness. This is important because your credit score and report determine how financially responsible you are, with the information used by financial institutions to assess your credit standing when reviewing an application for a loan, credit card or other credit facilities.
The report will help you identify your total debt, the type of debt you have and your payment history, while the score predicts how likely you are to make your loan and credit card payments on time. Having access to credit information will in turn empower you to make smarter decisions about your current and future finance. A higher score, for example, will ensure you get quicker approval on any loan products.
To improve your score, look for ways to consolidate your debt or lower your interest rates and then work your way through paying it off. This is a key financial resolution you can make yet the Visa report showed that only 17 per cent of UAE residents prioritise their debt repayments. Overall, controlling the number of loans, consistently reducing outstanding balances, and making payments on or before the due date will improve your credit score.
The good news is that 61 per cent of respondents in Visa’s survey felt knowledgeable about financial matters, backed up by an overwhelming majority who are saving. Nevertheless, with 18 per cent indicating that they do not budget and only 16 per cent of the monthly income being saved on average, the survey’s findings show that there is room for improvement.
Andrew Woolnough is the vice president, Corporate Communications, Central and Eastern Europe, Middle East and Africa - Visa, and Daniele Lavalle is the head of business development at Al Etihad Credit Bureau
Updated: February 19, 2019 11:14 AM