It is that time of the year again when all of us are likely to review how 2007 has flown by and how we are to usher in 2008.
On the macro side and being in a globalised world that we Malaysians are part of, many recent newspaper headlines and commentary had focused on problems related to U.S. mortgages, the bad news from the U.S. housing market, and the associated slowing of the U.S. economic growth, coupled with worries about rising protectionist pressures from different countries in the world. All these can adversely impact on the economic growth of Malaysia.
However, on the bright side for 2008, the November presidential election in the U.S., the summer Olympics in China and the planned implementation of projects from the Ninth Malaysia Plan can help our domestic economy override volatilities that will surely come from the economic slowdown of the world’s largest economy.
At time of writing this article, the U.S. Federal Reserve ( the ‘Fed’ ) had reduced the federal fund rate by a further 0.25% plus a 0.25% reduction in the discount rate. The market though unhappy with not obtaining a 0.50% reduction in the federal fund rate, realized that a reduction is better than no reduction and it strongly supports the believe that the Fed is committed to preventing a recession in the U.S. This means that where necessary, the Fed is likely to reduce the rate further in the future. It is likely that the Fed wants to restore a sustainable smooth functioning of the financial market that can ensure a real GDP growth for the U.S. economy. The growth of the U.S. economy will also ensure that the global economy will grow.
On the micro side, it is time for everyone to start making plans for the arrival of 2008. Many will be planning parties, attending parties and just spending time with that special someone. For working adults, this is not something new. We all go through this every year. Out with the old, in with the new. It is also an opportunistic period for planning to better our lives and ourselves.
But hold it!! Year after year. We make the lists, we make the promises, we set those goals and then what do we do? We usually fail. Maybe it is time we take a different approach. Maybe it is time we make a resolution to change the way we make resolutions?
Sounds difficult? Sounds weird? Maybe it can even sound like a possible way to achieve what we want?
One recommended way is to start by making a wish list(s). Do not write down that you want to loose twenty pounds or exercise five times a week. That is called a big wish and the bigger the wish the harder it is to attain. The more effective way is to take that same wish and break it down into parts. It is more realistic to say you wish to loose three pounds by the end of the month. This is more attainable.
Now you need to start deciding how you can do this. You do not want to cut anything out completely. If you do this, then you are bound to fail. Maybe you won’t fail in week one, but what about week four? If you think you eat too many cookies, try saying you will only eat one or two cookies only every other day, not every day. By eating less of something you love, you are satisfying your craving, not depriving yourself, yet you are meeting your goals. Do this with all the things in your diet that is fattening or sugary. Little steps like this can help you achieve your goal, albeit slightly slower.
Some financial resolutions worthy of attention for every working adult are as follows:-
- Paying down your debt. Review your own monthly expenses. You may find, for example, that you have a credit card debt that has been sitting amongst your liabilities for a very long time. For some people it could be as long as the day they started working! Why this debt is still outstanding can be due to the ease with which credit card companies allow clients to make easy repayments towards their total credit card debt.
Ideally, this situation with credit card debts should never be sustained. As an example, let’s say from fixed deposits you receive 3.6% per annum. But at the same time you must pay the credit card company for all your outstanding debt owing to them at a rate of 1.5% per month or 18% per annum. Imagine what a fantastic mismatch this is! It just means that the sooner you pay off your credit card outstanding the more net savings you accrue.
- Set up an Emergency Fund. The concept of an emergency fund is based on the fact that there are occasions in a family where a sudden surge of spending is required within a short time. Such a need can arise, for example, if a family member falls ill and money is needed to pay for medical treatment and medications. The emergency fund can be parked in fixed deposits, savings accounts or any other liquid financial instruments. Liquid financial instruments mean any instrument that can be turned back into cash in a short time.
- Set up a Retirement Fund. For most adults, at some point in their adult lives they do realize how fast time has flown by. For those with a grown family, was it not like yesterday that your children were still babies and you had to watch over them, guide them, nurture and educate them. And now they are on their own feet and some of them have married and have their own children. For those with young children, was it not too long ago when you and your spouse only had each other and now you have all the responsibilities that parenthood brings.
Irrespective of how where you are in your active working life, you realize that one fine day you will retire and that time can appear in front of you, literally at a blink of an eye. Then are you ready for retirement? Retirement will mean you do not have an active employment income but you have every chance of living for almost as long as you have been working. This is a scary thought if you have not saved through your adult working life.
- Make a Will. Today it is easy to make a will and at a cost that can be tailored to a person’s needs. One of primary rationale for making a will is that in the event of death of the will-maker, his wishes can be carried out which includes the way he wishes to see his net assets distributed. The other advantage of having a will is that the person would have died testate according to the law. Dying testate means that the probate process can proceed without delay and the distribution of the assets will be effected as a matter of procedure.
- Cut health care costs. One effective indirect way to cut future health care costs is to loose weight and exercise. Exercising five days a week is ideal. But it may not be practical. Life gets busy. So say you wish to exercise three days a week. And on the days you cannot, you can make up by trying to walk more, like skipping that elevator for stairs. Little steps like this is better than doing nothing at all. Certainly for the most disciplined amongst us, keep a journal of your daily progress towards achieving that goal. A journal of your progress towards your goal is a great way to keep on track in minimizing future health costs.
Reminding yourself about your goals is also an excellent way to achieving your New Year’s resolutions. One of the many popular ways to loosing weight is to take a “before” picture. Visual images of your loosing weight and getting fit is a wonderful motivational tool. Not only are they a constant reminder, but they help you to stay focused.
- Get spending under control. It takes discipline to budget but this is one sure way of pinning down outflows being greater than inflows. Imagine how well your wealth will grow if you are able to ensure that every month you have a cash surplus rather than a cash deficit. Part of the cash surplus can then be used for investments that should contribute to enhancing your overall assets.
If you judge that maintaining certain wishes or resolutions is difficult, do tell a close friend about your New Year’s resolution. A close friend that will support you and motivate you towards your resolution is a great way to keep your eye on your goal. It is believed that the more people you tell about your resolutions, the better your chances are towards achieving your goals. Your friends can check up on you and
make sure that you are keeping good on your resolutions.
Apart from financial resolutions, there are other non-financial resolutions that many others have adopted at the start of a new year. Here are some of the popular ones:-
- Learn a new skill, possibly one that could come in useful at work or business.
- Learn or relearn a second language. In the Asian context, with the economic importance of China and India in the years to come, there are compelling reasons to make the effort to be able to interact in Mandarin, Tamil or even Hindi.
- Improve your communication skills. Learn to be good in reading, writing, speaking and listening.
- Watch less TV. Some adults spend 20 hours or more each week doing the couch potato routine in front of the set where what they consume does not feed their minds. If they had only cut out just an hour of TV each day, they would have found all new kinds of time for other pursuits.
- Start working on a set of goals, divided between short-term desires and long-term achievements. But plan to revisit this set once a month, making changes as needed. By assembling your goals, you begin to think more about them and make it more likely you will take steps to meet those goals.
- Refurbish your wardrobe, even if by just a few items each month. The better you think you look, your self confidence rises that can lead to better prospects for yourself.
- Volunteer your time, particularly if you can find something that may increase your skill set, offer you satisfaction, or make a difference that you feel good about.
In short, the goals that you create must be realistic. Keep yourself positive! It is easy to gain negative thoughts, especially if you do not see immediate results. Give your resolution time. Great things were not achieved in one day. If you get off track, do not beat yourself up. Instead, make sure that you get back on track, and keep moving forward!
The suggested resolutions and other resolutions you bring forth might be something you want to do to improve your lifestyle for 2008. Persevere, stay on track and remain flexible! Your New Year resolutions CAN be achieved!
Roland Lee
