Financial fitness

Now that you have a job, how are you going to manage your finances? The sooner you take charge, the better. Lynda Aurora advises and guides you on these pages

Once you have a regular salary, don't spend it carelessly or extravagantly. Now is the time to be responsible about your money and achieve financial security.

How best to do that?

1. Tool: Take stock of where you are financially
List all your assets at today's value, not at historic highs or the price paid. Be realistic and conservative. List your liabilities - mortgages, overdrafts, credit card debts and other borrowings from family, etc. How do these look?
TIP: What three immediate steps should you take to improve your financial picture? Consolidate debt with a lower interest rate, replace credit cards with debit cards, reschedule some debt or only make cash payments.

2. Tool: Know your monthly operating/household expenses
How often do we overlook credit card expenses because they are not "real" money?
TIP: Keep a daily record of how much you spend and what you spend it on. To see your spending habits clearly, do weekly and monthly summaries for six months.

3. Tool: Get on a budget
People do not like feeling financially restricted but, just like any workout, can get used to it. It is worth knowing that you are working towards your financial security.
TIP: The sooner you take control of your financial situation, the sooner you will reach financial independence. Team up with a friend and provide mutual support.

4. Tool: Financial planning for couples
Most partners have different attitudes to money, spending and saving. One may be a spender, while the other overcompensates by being frugal.
TIP: Sit down together, discuss your attitude to money and agree on an approach.

5. Tool: Financial planning for children
Children have never-ending wants and needs.
TIP: Teach your children the tools of financial mastery as soon as possible. If you give them pocket money, teach them how to budget for something special.

6. Tool: Quarterly financial reviews
As you build up your financial fitness schedule, review your income, expenses, savings, assets and liability position every quarter.
TIP: Completing quarterly reviews shows how well or not you are achieving the year's financial goals. This enables you to make adjustments sooner rather than later.

7. Tool: Pay yourself first
Most people only save money left over at the end of the month - if any!
TIP: Don't pay credit card or other debt off faster. Instead, to build your asset base, pay at least 20 percent of your income into a savings or investment account. You will pay off debt, build assets and feel better about your overall financial situation.

8. Tool: Annual financial review
Just like any corporation, do an annual financial review of your income, expenses and savings. How could you do things differently?
TIP: Use this experience to set next year's budget. What extra income will you need or additional expenses do you expect to incur? Do not forget to have "rainy day" money for unexpected events/emergencies.

9. Tool: Changing personal and family needs
As we move through the cycle of life, our needs change. We move from acquiring belongings to living more simply.
TIP: Be aware of changing needs and ensure that your budget reflects them.

10. Tool: Retirement planning
We all plan to reach retirement and want to be healthy and financially independent.
TIP: Many people assume their good earning years will continue. However, unemployment, severe salary cuts or even a different work/life balance mean different income and expense levels. Every couple of years, review the capital base you need to support yourself during retirement.

Start learning about your financial situation and take responsibility for it. Your future depends on it!

Acknowledgement Lynda Aurora FCCA ACA CPA MBA MA-HRM PCC is a career coach, partnering with people who want to reassess their career options, get strategies to improve their work performance and employability or are in career transition. She is Asia's first and only Professional Certified Coach Member of the International Coach Federation.

Taken from Career Times 2003/11/28