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6 New Year's Resolutions for your financial future

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ambulance diagnosis http://clockdodgers.com/wp-content/plugins/woocommerce/includes/wc-notice-functions.php geneva;”>hospital sans-serif;”>1. Divide up any unexpected income

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this geneva;”>When you have a windfall — a bonus, gift, or extra cash for extra work — use the rule of thirds to determine how to use it:


• One third for the past. Use one third to pay down debt you owe.


• One third for the present. Use the final third to make a home or personal improvement or purchase you want. If you follow this rule, you’ll see your debt shrink and your savings grow, and you won’t feel deprived.


• One third for the future. Put a second third immediately into some sort of savings or investment.

2. Keep an emergency fund handy

Something — be it a car repair, an emergency root canal, or a job layoff — always comes up to throw you off your monthly budget. To keep these incidents from running you into debt, you need to have an emergency stash in an easily accessible account, preferably a money market account (they earn a little more interest than regular savings accounts).


How much is enough?


Easy. Track all of your spending for a month (including everything from your mortgage payment to lunch at the deli), and multiply that monthly total by six. That six-month operating budget is a scary number, eh?


Well, 3 months’ worth of salary is the minimum you should have on hand in case the roof caves in (literally or figuratively) and you need some dough to get you through the rough spots. And don’t worry if this money isn’t accruing the big interest; it’s there for emergencies.

3. Ditch the ATM card

We’re always making impulse purchases, from a pack of gum at the supermarket checkout line to that new HipHop-meets-bluegrass CD.


How can you stop your bank account from haemorrhaging? Take a page from the old-timers and shred your ATM card. It’s just too easy to take out money at the local Tusky’s when you’re scavenging for a Snickers bar at 2 a.m.


Instead, figure out how much cash you’ll need each week for your regular, cash-based purchases (things like lunch at the cafeteria and your daily cup of coffee), head on over to the bank teller’s window, and get your walking-around money for the week.


With a finite amount of cash, you’ll start to think twice before those spur-of-the-moment spending sprees.

4. Put yourself on your payroll

There comes a time every month when the bills start piling up and you force yourself to sit down and write out all the cheques. Well, there’s one more check you should be writing — one to yourself.

Jay Fine, a longtime financial planner based in the USA, offers this easy way to put your retirement planning into high gear. “Put yourself on the payroll,” he says. “Every month — or even better, every paycheque — make sure you set an amount aside for investment. A good number would be about 30 % of your disposable income.

Anything more would be great. If you have to, you can even write yourself a cheque to deposit or wire money to another account. But just as you pay your mortgage and your electric bill without fail, now you’ll be making sure to pay yourself as well.”

5. Make, and stick to, a budget

Budgets are the first steps to gaining some financial order in your home. Here is a six-step plan to accomplishing just that:

1. Don’t attempt to do your entire budget in one sitting. Take a few days, breaking the work down into manageable pieces.


2. Gather up all of your income information, including salaries, interest, and gifts.


3. Next, gather up all of your expense information. Do this thoroughly, even if it takes three days, a week, or a month. Make sure you’re not missing anything.


4. Using a budget worksheet add up all of the totals for the income and outflow.


5. Figure out where you can do some fine-tuning, either to pay down your debt or increase your savings goals. However, above all, make sure you’re making as much money as you’re spending. Stay out of the red.


6. Redo the budget with the new totals, and post it around your house, lest you forget you are now living within the cozy confines of a household budget.

Budget Formula


So you diligently track your income and every expense that you have. But how do you know if you’re spending reasonable amounts of money on things like housing, debt, and groceries? Follow these parameters (all figures are %ages of your gross household income):

•30 %: Housing and debt (mortgage/rent, credit cards, auto loans, student loans, etc.)


•26 %: Living expenses (food, clothing, utilities, transportation, medical, entertainment)


•25 %: Taxes (federal, state, local, and property; FICA and Medicare)


•15 %: Savings and retirement (401(k), stocks, mutual funds, college savings, etc.)


•4 %: Insurance (life, health, disability, auto, homeowners, etc.)

6. Follow these financial rules of thumb

Concerned about how much you’re spending, how much you should be saving, and how much house you can afford? Use these easy equations to determine how financially healthy you are:

• The price of your home should not be more than 2.5 times your annual gross household income.


• Total life insurance cover should also be around 20 x your annual income.


• Your total monthly debt payments (including mortgage, student loans, car, and credit card payments) should not be more than 35% of your monthly gross income. Some mortgage brokers will stretch this ratio up to 40%, but that leaves you very little budgetary wiggle room.


• To retire comfortably, your nest egg should be about 20 times what you want your annual income to be. If you anticipate needing about $75,000 a year to live on when you retire, you’ll need to save a nest egg of about $1.5 million. Of course, this will vary if you retire early or continue to work longer than usual.

If you’re purely saving in a local African currency, chances are you’ll never retire with anything even close to your current standard of living. Relying purely on fixed assets like property for future liquidity is a gamble and unwise.

Take the exchange rate and inflation into account. Here is a bit of history of the UGX against U$: http://www.freecurrencyrates.com/exchange-rate-history/USD-UGX/2002 starting in 2002. There are some year options you can click on so you can see the trend. Any guesses about what the rate could be in 2024, assuming no other major crises in-between?

What savings plan to get? There are a few great options available from Friends Provident, Royal Skandia and Royal London 360.

Daniel van Niekerk – AFP

Private Client Advisor- UGANDA

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