The New Year is upon us and, for many, that means it’s time to make resolutions. From developing healthy habits to learning new skills, resolutions vary from one individual to another. Unfortunately, one common roadblock is the temptation to abandon the New Year's resolutions in just a few weeks, if not days. Experts predict that as much as 80%(1) of those who make a New Year’s resolution give it up by February. However, the worldwide pandemic may have inspired a change. The UAE residents have reported a greater commitment to stick to their resolutions in 2022, thanks to an increased appreciation for wellness and gratitude developed during the peak lockdowns.
If you’re ready to let the New Year inspire you to make positive changes in your life, setting new financial goals is a great way to start. Whether you have a specific goal in mind — like buying a home, growing your savings, or starting an emergency fund — the following tips will help you set fail-proof resolutions.
Rethink your financial goals
One of the biggest reasons why New Year’s resolutions of all kinds are abandoned is that they are too lofty to begin with. Sometimes the goal is unrealistic or unattainable; other times, the goal is too difficult to track, likely because it would take too long to achieve. If you can’t track your progress towards your goal, you’re more likely to lose focus and quit the new, healthy habits you’ve started.
"Half of all UAE residents reported a goal of providing monetary support to their families."
For instance, a 2020 study(2) found that half of all UAE residents reported a goal of providing monetary support to their families. This goal is broad and tough to track. Therefore, it's important to break such big goals into smaller milestones that you can easily track. Instead of setting a larger goal of providing monetary support, challenge yourself to earmark a certain amount for a specific purpose like children’s education fund, vacation fund, etc. Smaller goals will allow you to track progress and stay motivated as you accomplish new milestones.
Update your budget
Setting a budget is perhaps the most important financial skill you can develop. If you've previously created a budget but didn't update it as circumstances evolved, it may fall short of expectations. Budgets need to be reviewed and analyzed periodically. An increase in the price of products that you frequently buy at the grocery store, a salary hike, or sudden unforeseen expenses will all impact your budget.
"Researchers have found that, between 2018-19, spending on food and accommodations in the UAE households increased by 4.2% (3) on average."
Over time, your spending patterns change as well. Your grocery store bill may be lower when your children are younger; or if you worked remotely during the lockdown but have since returned to the office, your transportation, dine-out and utility expenses may have changed as well. Researchers have found that, between 2018-19, spending on food and accommodations in the UAE households increased by 4.2%(3) on average. Before the New Year, take the time to review the previous year’s budget and how your actual spending measured up. Then, make necessary updates to ensure your budget is helping you maximize your savings and value.
Consider your debts
If you have outstanding student loans or other debts, you’re likely focused on putting leftover money towards clearing them. But if high interest rates are causing debts to pile up as quickly as you can pay it down, progress can be slow. So, consider refinancing your debts. Refinancing a student loan, mortgage, or vehicle loan can help you get a lower interest rate. For credit cards, consider a personal loan with a lower interest rate or a balance transfer credit card with a low or zero interest rate. Over time, this brings incremental savings, allowing you to clear your debts faster.
Make your savings work for you
While you’re checking the interest rates on your debts, don’t forget to consider your savings accounts as well. If you’ve set a New Year’s resolution to travel more, you may want to make sure that your savings are growing as well. A savings account with a higher interest rate can help you achieve that. However, you may have to put some thought into lock-in periods. Some of the savings options are designed for the long-term, liable for a penalty if you decide to withdraw funds before the stipulated time. If you need greater liquidity for emergencies, it is best to opt for a lower interest rate but retain easy access to funds.
Protect your family’s future
The best New Year’s resolutions are those that allow you to see progress in the short term. But there are goals that you accomplish now, and you may or may not see the results immediately. Protecting your family’s financial future is one such goal. Investing in life insurance and creating a will are two great ways to ensure that your family is protected if the worst-case scenario occurs. Consider adding these items to your resolutions list in 2022.
If you’re ready to make 2022 the year that you finally keep your resolutions, these financial tips can help you to do just that. From reviewing your budget to rethinking your goals, these small changes add up to big results and a brighter financial future!