The new year 2023 is here. The beginning of the year is the right moment to review various things done in the past year and then determine the goals and targets you want to achieve in the coming year. What are some tips for making new year’s resolutions in personal and family finances? Here are some tips, summarized from personal experience.
Clearing debts is one of the best financial resolutions to make a top priority for the new year. Make a list of your debts, including the obligations, due dates, and other detailed notes. If you have limited funds, prioritize repaying non-productive debts with high-cost burdens. Online loans, credit card debts, compound interest debts (if you do not clear the debt this month, the debt value will accumulate in the next month), debts in foreign currencies, and other consumer debts are examples of debts that can be prioritized for repayment.
In 2013, I had a credit card debt of IDR 20-30 million from one credit card. The debt arose because it was used for company operations, such as payment for cloud services, hosting, servers, and others using a credit card. Although it is called productive debt, the debt became dangerous because client payments were not always in sync with debt payments, and in addition, there was a lack of discipline in payments.
The minimum payment for the debt was IDR 2-3 million per month, with an interest burden of IDR 500-800 thousand. I do not recall the percentage of interest, but I remember that the interest burden was in that range. One can imagine the anomaly because I struggled to save IDR 1 million per month, but I need to pay IDR 500-800 thousand per month for the interest.
By making a resolution to clear debts, I was able to focus on making a repayment plan to end the burden of bill interest. With hard work and maximizing savings, I could finally clear all credit card debts before the middle of the following year. When the credit card debt was fully cleared, I felt relieved from the burden on my shoulders.
Create a Monthly Budget
One of the main problems of personal and family finances is that we do not know our monthly expenditures. We are more impulsive, buy things without planning, and wonder when our money runs out. Make a budget record that includes your monthly income and expenditure so that you can know your actual financial situation. Record your budget allocation, including your savings, debts, and investments. Having a budget record allows you to control your expenditure and adjust your financial plan according to your financial condition.
I used to think that a monthly budget was unimportant because I knew all the data on my income and the regular expenses I had. However, records based on memory are not reliable. There is a tendency to underestimate expenses because you feel that you still have extra money. Having a monthly budget and recording its realization can prevent this and also be useful in selecting waste or the vulnerability of a situation because we only rely on one source of income.
In my context, I only had one source of income, which was my monthly salary, while there were tens to hundreds of expenditure items. This is what finally drove me to improve my education and skills, as well as look for new sources of income without disrupting the work I was doing.
Saving is a very important aspect of personal and family finance, both in the short and long term. Determine the savings target that you want to achieve in the coming year, and make a plan to achieve it. Make saving a habit, for example, by setting aside a portion of your income every month for savings. You can also increase your income by finding additional sources of income or by negotiating a salary increase with your employer.
Another way to save money is by automating your savings. You can set up automatic transfers from your checking account to your savings account so that you don’t have to remember to transfer money manually. This way, you can save without even thinking about it.
You can also save money by cutting back on unnecessary expenses and finding ways to save on the things you need. For example, you can save money on groceries by planning your meals, shopping with a list, and taking advantage of sales and discounts. You can also save money on utilities by turning off lights and electronics when you’re not using them and by using energy-efficient appliances.
Don’t forget to protect your savings by setting aside money for emergencies. It’s important to have a cushion in case of unexpected expenses, such as car repairs or medical bills. A good rule of thumb is to have at least three to six months’ worth of living expenses saved up in case of emergencies.
Investing is one of the ways to increase wealth in the long term. Determine the investment goals that you want to achieve in the coming year and make a plan to achieve them. Do your research and choose investments that suit your financial condition and risk tolerance. Don’t be swayed by the hype of high returns without considering the risks involved. Seek advice from trusted sources, such as financial advisors or experienced investors, before making an investment decision.
If you don’t understand investment instruments other than savings in a bank, make a resolution to learn about and register for other investment options such as Sukuk, bonds, stocks, mutual funds, precious metals, and others. Nowadays, the process of learning and registering as a new investor is very easy. You can register online at various securities firms, have a video call to verify, and easily buy stocks and mutual funds through a mobile app. You can also buy retail Sukuk or government securities (SBN) with values starting from IDR 1 million with a good income coupon value.
Personally, I started investing small amounts in 2012-2013 by buying mutual funds, then moving on to stocks, precious metals, Sukuk, and other investment instruments. I remember buying ADARO (ADRO:IDX) stock at a price of IDR 800, which then rose to IDR 2,000, then dropped to IDR 500 before now rising to around IDR 4,000. Experiencing fluctuating investment values due to the ups and downs of stock prices, receiving dividends from various stocks I own, and receiving capital gain from stocks sold after some time can be a good learning experience for selecting preferred stocks for the future.
I also still remember when I started investing in noble metals when the price of gold per gram was around IDR 450 thousand. I hesitated to start saving in gold because I thought the price was already too high. In the end, I decided to still invest in precious metals in the form of Antam gold with a small initial value. Today, gold prices are more than double, over IDR 1 million per gram.
Reducing costs is one of the effective ways to increase your savings and improve your financial condition. Make a list of your expenses and identify areas where you can cut back. For example, you can reduce your monthly expenses by switching to a cheaper phone plan, canceling subscriptions you don’t use, or cutting back on dining out and buying coffee. You can also save money by shopping for the best prices and taking advantage of sales and discounts.
Another way to reduce costs is by making strategic changes to your lifestyle. For example, you can switch to a cheaper mode of transportation, such as taking the bus or carpooling instead of driving your own car. You can also save money on housing by downsizing to a smaller home or apartment or finding a roommate to split the costs. These changes can free up more money toward your financial goals.
Finally, don’t forget to stay organized and keep track of your progress. Use budgeting tools and apps to help you stay on top of your finances, and regularly review your progress to see how you’re doing. By following these tips, you can make meaningful progress toward your financial goals in the new year.
I hope you can get insight and achieve your financial goals by following these tips.