How to be Financially Ready for 2021

Preparing a list of new year resolutions is a fairly common practice, with the most popular of resolutions typically related to losing weight, getting healthy, exercising regularly and saving money. Without a concrete plan, however, most of these resolutions tend to fall to the wayside, eclipsed by daily life and other responsibilities that crop up along the way.

Not one for new year resolutions? Well, considering the year that was 2020, having a finance-based resolution is one that is seriously worth considering.

While the idea of being financially prepared for the coming year seems almost moot, especially for the many who are struggling to make ends meet, 2020 has proven that preparing yourself financially has never been more important. Whether you’re earning a regular income, have been laid-off, are financially comfortable or are barely scraping by, the end of the year is a good time to evaluate our finances and prepare ourselves as we embark on a new year that is both hope-filled and uncertain.

We have some ideas to help you get started.

Set a monthly budget – and stick to it
Start by listing down your monthly income, and then create categories of your regular expenses. This can and should include food, rental, utilities, bills, loan repayments, education, and miscellaneous expenses, among many others.

If you’re not sure where your money goes to, review your spending habits this past year and take note of your expenses. Still uncertain? Start fresh in January and diligently monitor your expenses for a month. Use that as a base to set your budget for the rest of the year.

Trying to be as detailed as possible, allocate your monthly income into your budget.

Find yourself with a deficit at the end of the month? Look through your budget to see where you can cut down.

If your income varies month by month, opt to use a minimum or an average monthly figure. It’s better to work with a smaller budget than to plan big but not have the funds to back it up.

Creating a budget may seem overwhelming at first, but you only really need to do it once. A clear budget helps you see exactly where your money goes, empowering you to make better financial decisions in the short and long run.

Create financial goals
Now that you have a budget, create goals to help you achieve specific financial targets.

These goals can be varied, from helping you to be debt-free, establishing a retirement fund, saving for a down payment on a new house, or even purchasing a new phone.

Feel free to list down all your financial goals, however, it is always best to focus on the goal that will help reduce your financial risks first, especially if they are something that can be achieved in a shorter time frame, such as paying off your credit card debt.

Decided on your goals? Allocate a portion of your budget towards them every month. Having fewer goals will help you achieve them faster, and once you’ve achieved one goal, you can always introduce a new one. Your various goals do not need to have the exact same time frame. Be flexible. Once you’ve played around with your budget for a couple of months, you’ll be able to understand your finances better and adjust accordingly.

While targeting for the big stuff is important, don’t forget to reward yourself a little. Create a holiday goal, budget for that new gaming console, or maybe there’s a pair of designer shoes you really love. Instead of charging it all to your credit card – thus incurring more debt – saving up for your purchase and having the funds to pay for it will be more satisfying and motivate you to reach your other goals.

Besides rewarding yourself, consider those in need. Putting aside a little amount every month to help others or donate to charity is a noble way to use your extra income.

Don’t forget to set up a long-term emergency and retirement goal
If there’s one lesson 2020 has taught us, it is that many of us are not ready to withstand extended financial difficulties, especially if we no longer have access to a regular income.

With this in mind, don’t forget to budget for an emergency and/or retirement plan. You can choose to allocate a monthly fixed sum into this budget or transfer all excess funds at the end of the month into your emergency/retirement goal.

The recommended amount to have in your emergency fund is six to twelve months’ worth. And now that you have a budget in place, you’ll know exactly how much you need.

Instead of leaving your emergency/retirement fund accumulating in your regular account, consider participating in a suitable savings plan specially designed to help your money go the distance. This includes established public or private retirement funds, investment savings funds, as well as savings-focused Takaful and insurance plans, which often comes with additional benefits.

PruBSN Aspirasi is one of these plans. Designed to help you manage your future today, PruBSN Aspirasi focuses on helping you secure your future through savings, investments and protection, while also providing you a platform to plan and manage your finances. With a fixed contribution payment term of five, ten or twenty years, benefits include annual cash payouts (from the end of your second year onwards), a lump sum maturity benefit at the end of your benefit term, potential returns via shariah-compliant investment-linked funds of your choice, and financial protection for your family in the event of total and permanent disability or death.

If you would like to participate in a takaful certificate that provides you with additional protection including unique diseases coverage, higher coverage amounts, hibah, and extended coverage up to the age of 100, opt for PruBSN WarisanPlus. It’s an affordable and customisable protection plan!

Both these plans can help you save, not just for an emergency or your retirement, but can also provide financial support for your family and loved ones in the event of an unfortunate incident.

Keep track of your budget!
Unless you’re born with an eidetic memory, write your budget down! This is extremely important as having a visual reference of your budget will literally help you see how you use your money. You can choose to keep it old-school and write your budget in a ledger, or if you’re an Microsoft Excel whizz, create a spreadsheet. Free and paid downloadable budgeting templates are also available on the internet.

Alternatively, a personal budgeting software is a great tool if you’d prefer not to deal with manual writing or creating formulas. Several desktop, web-based or mobile app budgeting software is available for free or a paid fee. Most come with a free trial that is worth taking advantage of so you can find one that works best for you. These software can help you get started on your budget in just a few minutes.

It’s never too early to start planning your finances
Do you remember how you would skip eating at the canteen so you can save your pocket money to buy a toy? Well, planning your finances is pretty much the same, except you now have a lot more financial responsibilities to budget for.

Whether you’re still studying, already working or even getting close to retirement, if you don’t have a planned budget, start one now.

While having fixed budgets and allocations may initially come across as restricting, the opposite is actually true – budgeting your finances is extremely liberating as it allows you to understand how your money works, and more importantly, make it work for you. Budgeting can help you plan for potential curveballs, and every little amount you put towards your goals is an inch towards better financial security and freedom.

So, don’t dilly dally, start budgeting today. Even if you’re reading this midway through 2021 or any other year, it is never too late to start. You’ll be thankful that you did.

Download a brief infographic here to help you manage your finances better! 

For more information about PruBSN Aspirasi and PruBSN WarisanPlus, get in touch with our Takaful Agents.