Money Resolutions for the Year of the Dragon (2012)
It's been more than 3 weeks passed the first day of 2012 and we would like to ask "How are your resolutions going?" or specifically "How are your money resolutions going so far?". We understand that resolutions about personal finances are very hard to achieve but then again we can do something about it. It has something to do with our habits and practices.
Today, we would like to share to you an article posted on The Wall Street Journal. The article started with the following common words, common goal of ours - "Save More, Borrow Less." Very familiar and simple right? Yet, it is very challenging especially when we are not properly educated about finances and how they work.
The author of the article asked helped from IDEO which is by the way one of the design consultancy companies that Honeycomb looks forward to (in design and innovation perspective). According to IDEO's Ryan Jacoby, "Behavior change is the hardest thing to design for"; "Anyone who has ever tried to quit smoking or lose weight can attest to that".
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| Photo source: http://goo.gl/5f0iT by Katy Dockrill |
So how to address this challenge? Their solution is to think buckets, not budgets. According to Mr. Jacoby, "buckets are more in keeping with how people naturally think about their money." "We resonate with things that are more visual". We at Honeycomb agree to this statement. As you can see in the picture above, it is more relaxing to think pools of money into buckets, not those charts that makes us stressful or frustrate us even more.
Read more about the article here or head down for Honeycomb's simple tips to start your year 'right on the money'.
So here are 3 things to get started this year:
1.) Set up your goals.
Identify your short term goals (less than a year), your mid-term goals (anything you want to achieve 1 year from now till the next 5 years) and your long term goals. Then determine which are high priority goals (HPG) and which are low priority goals (LPG).
Example:
1. Pay off credit card debt.
2. Save up for retirement.
3. Save up for Europe tour.
Among the listed goals, the HPG is obviously paying off the credit card debt and the LPG is saving up for the European tour. So for somebody who has a limited budget, or "bucket", your resources should be going to the HPG first before any LPG. More details on goal setting will be discussed in the coming posts. But you get the idea right?
2.) Have an expense journal handy.
Well, there are a lot of income-expense applications or software out there that we've tried. You can even make your own excel file of all your expenses. But based on our experience, there are just some expenses that we tend to forget. And these expenses when you add them up, will just surprise us that it has summed up to a significant amount. Cash expenses are the hardest to track since not all purchases have receipts. Transactions via credit card or debit card are easier to track since they can be accessed through your bank or online accounts. So, for the expense journal to work, find one that you can bring with you anywhere you guy and when you're taking a break from your busy day, you can just grab it and jot the things that you spent while it's still fresh in your mind.
3.) Separate your savings bucket from your bank account.
If you're the kind of person who can't determine yet on what to do with your savings BUT would still like to save for that rainy day or whatever purpose you may have, it is best to have a separate savings bucket from your bank account. Somewhere that cannot be easily liquidated compared to an ATM or checking account, maybe a mutual fund account. There are several mutual fund companies here in the Philippines, and some of them even allow you to open one with a minimum amount of P5,000 with regular additional investments at P1,000. More of mutual funds in the coming posts.
So here's to our first post of the year! We would like to welcome you to our blog! Stay tuned for more tips, updates, and announcements.
Happy Year of the Dragon and happy saving! :)
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