HOW fast time flies! Today is the last day of January 2022. One month has already gone in the new year. By this time, plans have been drawn and laid down for 2022. In fact, some are already being implemented. And from my talks with some family members, friends, and colleagues, I sensed their confidence and optimism about their plans. They were bolder in what they planned to do and achieve this year. Perhaps, this optimism is felt by many as we see some wins in our battle with covid. Though the new variant Omicron is more contagious and has recently caused a substantial increase in our COVID cases, with more people getting vaccinated, the majority of those infected showed mild symptoms and required no hospital care. Many have adjusted and adapted to live in the new normal and have planned accordingly.
I bet, much of the plans made, may it be personal or business-related, required budget and involved money. Therefore, it’s very important that one of the first things we should have and be clear on, at the start of the year, is our own financial resolutions. What is your financial goal for this year? What do you need to start doing, continue doing, and stop doing in order to achieve your financial goal for 2022? While we agree that making our financial resolutions is very important, sadly, it is often, neglected.
The first step to making your financial resolution is to identify your financial goal. Is it to remodel your house or build your dream home for the family? Is it to save up for your kids’ college education? Is it to build your emergency fund? Is it to fully pay your credit card debts? Or is it to add up your retirement funds? Having a clear financial goal/s will allow us to prioritize and will give us the purpose why we need to save our hard-earned money. The job of the money we are saving or have saved is to help us achieve our financial goals. As we usually have multiple financial goals, it will help if we categorize them as short, mid, and long term and whether essential or non-essential. Then we put a target date for each goal. Though it’s not cast in stone, somehow having a timeline will give us some sense of urgency and control.
Next is to analyze and work on the 3 important variables that will impact your financial resolution and determine your capability to achieve your financial goal. These variables are Income, Savings, and Spending.
Variable #1: Income
First things first. Before we can talk about how much to save and spend, we need to have income or money. How is your present income? Do you have a steady source of income from your employment? Are you paid based on projects or contracts? Are you on a commission basis? Salaries, wages, and commissions earned from these are called active income. Or are you living on money received from investments, rentals, etc? Or what we call passive income. In my case, prior to my retirement, income was mainly from my employment. But since I was already investing and have properties back then, passive income was coming in as well. Now that I have fully retired, my main source is passive income.
Wherever our income is coming from, the goal is to keep it and add to it. What will you start or continue doing this year to fatten your income? While it is true that the pandemic resulted in job losses, it also created a number of income opportunities for the more creative, hardworking, and resourceful ones. Online sellers mushroomed everywhere. In most households, one member is at least involved in online selling. And since most are in a work from home setup, even full-time employees now have the chance to do part-time online selling and earn extra income. As one rider said in an interview, “ basta huwag lang choosy sa trabaho, may paraan kumita !” To which I totally agree! This might also be the year to start building your passive income.
Variable #2: Savings
But having an income is just one side of the equation. What we do with what we earn is equally critical. I used to follow “Income minus expense equals savings”. No wonder I had very small savings then. However, when I joined the insurance career, I was introduced to the right formula of “income minus savings equals expense”, which I have been applying on my own financial […]
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