AS 2023 comes to a close, it is a good time to reflect on your relationship with money, review and set new financial goals for the year ahead.
Your healthy financial habits are key to your long-term financial security. It is good to know the spending levels you can afford to sustain, rather than over-extend and be in debts.
Therefore, reflect on where your money was spent in 2023 and all the expenses that got in the way, as that gives you a good start when budgeting for 2024.
Over spending during festive seasons can set you back for the last minute splurges.
As Kimberly Law, a licenced financial planner with Uno Uno Advisers Sdn Bhd, put it: “You can still enjoy but do not over do it. Keep track of your spending, especially during festive season.’’
The year 2023 was a good year as despite the many warnings of a hard economic landing, most major economies were able to avoid a recession. As for 2024, there are many predictions out there that still point to a global economic slowdown and a “soft landing’’ in some markets.
JP Morgan predicts a “more challenging macro backdrop for equity markets next year with lackluster earnings growth and geopolitical risks set to weigh on the outlook for stocks.”
According to a report, World Bank data suggests that many developing economies are on a “path to crisis” because of high interest rates.
The changes globally will in some way or another affect our spending power.
“We must therefore have a good mindset and healthy relationship with money,’’ Law said. She suggests creating a comprehensive budget and setting financial goals for the new year.
Allocate your income in different categories such as groceries, transportation, housing and savings and have an emergency buffet of at least three months on standby.
You can have different types of budgets for holiday and travel expenses; celebration, gifts and donations; self-treats; debts; etc.
A useful method is to use separate accounts (eWallet, bank account and app like Touch n Go eWallet to store cash) to allocate for different expenses on a monthly basis so as to avoid dipping into your savings, she said.
It is good to save but it is also important to invest as that can potentially help grow your wealth over time.
There are many asset classes to chose from. Do your homework to know where the global equity, bonds and commodity markets and real estate are headed to make informed decisions when investing.
If necessary, seek professional help when investing and be mindful of the growing number of scams and cyber threats.
In your budget planning, do take into consideration how much debt you can pare down next year as this will help reduce your overall debt.
As a report stated, prioritise paying off high interest debts such as credit card balances, personal loans and student loans.
The report pointed out that with rising health costs and longer life expectancy, you may want to look into a health insurance plan.
“Review your finances for monthly commitments, daily and ad hoc expenses to keep track and review your spending so you will know whether you are in deficit or surplus every month,’’ Law said.
To save cost, she suggested taking advantage of sales and promotions, but try to avoid impulse.
Making resolutions is common for many people at the start of a new year.
“It is good to make resolutions but do also hold yourself accountable for the progress,’’ she said.
She also suggested that it will do you good to familiarise yourself with the different types of reliefs in the Malaysian tax system.
“This can help us plan our expenses accordingly. It is important to know the difference between tax reliefs and tax rebates which many people still get confused about.
“However, do not go out of your way to spend on things you don’t need just because there are provisions for tax relief,’’ Law added.
