Tuesday, January 5, 2016

Financial Implications of New Year Resolutions

TWS_Wahome Ngari

Citizen TV’s Hussein Mohamed concluded an exclusive ‘One on One’ end of the year 2015 interview with Kenya’s Deputy President, William Ruto, with a question on NEW YEAR RESOLUTIONS.

The Deputy President, who had during the entire interview session responded boldly and carefully to all the other questions from the TV journalist, technically shied away from the question about resolutions with a promise to think about his New Year 2016 resolution.

That the Deputy President was not quick to answer to the resolutions question was remarkable. Most people generate a poorly thought out list of New Year resolutions that hardly live beyond the 2nd week of January.

Usually, at the beginning of the year, people get the opportunity, excuse, incentive or reason to put together New Year resolutions, goals, objectives, dreams or plans. By the end of January one gets a chance to check out if the resolutions set were more than just thoughts and if they have morphed into something substantial.

Firmness of purpose does not just involve nice-sounding goals that you post on social media platforms such as Facebook, or during appearances on Radio or TV. It should include plans that will change your life; a different way of doing things that will earn you a promotion or a fatter cheque at the end of the month.

A Harvard Professor is noted to have inferred earlier in 2015, that the most common new year resolutions at a personal level the world over include; losing weight, quitting smoking,  quitting drinking, taking up physical exercises, getting out of debt, helping others, learning something new, spending more time with family, getting organised and enjoying life more.

It is important to consider the financial and social changes that will need to be made in pursuit of the goals.

If you set out to lose weight for example, you must not lose sight of the fact that you will need to invest time in exercises at the expense of other social and work engagements. To exercise frequently you might need to join a sports club or a gym, you have to buy the right attire (shoes and track suits), you might have to pay a personal fitness coach, buy some exercising tools like a skipping rope, you might have to change your diet or hire a nutritionist to help along, include some food supplements and finally change the wardrobe because of the new body size or shape.

This example helps us to focus on the financial implications of our New Year resolutions, and in the light of the implications mentioned in the example, a trigger for your thoughts on; 

a)     Personal Income; both active and passive, do you see it increase, drop, stay at the same level or even stopped? Are you planning to make money from your passive activities, talents or hobbies in the New Year? What are the practical steps you are taking to increase your income because each of your resolutions will require that you have more money than you had last year? I have not even mentioned inflation.  
b)    Expenses - Are they under control? Do you record them for accountability? Do you use budgets? Are you happy with them? What will you change so that you will not stall your resolutions?

c)     Investments - Will they increase? Will you diversify into new areas? What auto pay methods do you hope to employ so that your investments can grow securely?

d)     Debts - Will the bad debts reduce while good debts increase? How will you survive the financiers’ loops, snares and traps? Are you on the financial cliff? What is your debt stress level? Do you need to employ debt reduction strategies?

e)     Financial literacy - Will it increase by reading books and online financial content, listening to audios or attending seminars? What will your children or work colleagues learn from you this year? Have you identified the book to read? the program to watch on TV?, the seminar to attend? In a fast changing world old knowledge is not good enough.

f)      Risks Management - Will you work on health care, personal liabilities exposure, accidents, insurances, estate planning, nominating beneficiaries and personal records management?

g)     Investing in Gods' kingdom - Are you up to date on tithes, offerings, helping the needy and reaching out? What is the plan as the year moves on in matters of faith?

h)     A better me - Will you gain from your time, intellect, energy, knowledge, skills, attitude and networks? What is your career growth plan? What will it take to get a promotion? Are you still competitive in your market place? Are you planning to change employers? Any new passive income streams being set for the New Year?

i)      Financial Goals - Did you start the year with any SMART ones? Are they Short, medium or long term? Where are they recorded? How will you measure where you are on each as the year progresses? Who is your accountability partner?

j)      Financial Wellness – When you think about your financial life, is it joyful, stress free or is it fear and unbearable stress about your personal finances as you start the year? How do your resolutions support your financial wellness?

The business of setting personal goals is not in the school curriculum and as a result many professionals have a scant understanding of the concept of resolutions. They liken resolutions to good dreams and nice expectations, and hence fail to realise that the process of coming up with any resolution should consider medium, and long-term goals.

A lot of thought needs to go into setting goals. In an opinion piece for Harvard Business Review (HBR), Prof Chamorro-Premuzic wrote “we all have predispositions, character traits, and habits that we have built over many years, and most of our New Year’s resolutions involve breaking these patterns, which is very difficult to do and requires a lot of work… So you have to be deliberate and strategic”.

The improper setting of goals triggers a destructive pattern of behaviour that ultimately squashes them even before they are achieved. These self-destructive behaviours include procrastination, lack of commitment and focus, and failure to be accountable for the goal.

If you discover that you are not making progress as you set out to achieve the goals, then it is time to enlist the services of a life coach, who will guide you through the path to self-discovery. You can also enrol in a personal development program in the area you identify the need to do better.

To actualise your New Year resolutions, you need to put everything down in writing, especially the goals and how you plan to achieve them including a deadline for each step. It may also help to share the goals with a mentor, significant other or your supportive boss.

Remember. “Mental ink fades very fast. Write your goals down and chart them out like a map over the year.” Go for them, one at a time and success will be yours.

Wahome Ngari is the Principal Consultant at Citadel Consulting Ltd and runs the personal finance management program known as Wealth Creation Masterclass. He can be reached at wahomengari@citadel-africa.co.ke or on 0724 888219

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