6 Great Things To Do With Your Money Starting Today

I’m generally not a fan of resolutions,I favour longer- range, more deliberate kind of life planning, as opposed to believing that there’s something magical that happens on the 1st of January, that makes you different from who you were on the 31st of December. That said, the beginning of a new year is a new slate of sorts, that allows you to make certain changes that could add up to a better life.

This post isn’t about resolutions, but is about great actions you can take starting in January that are good for your finances and life generally.

1. Get medical insurance – Medical insurance may seem expensive, and a non-financial decision, but in my opinion this should be the first step you take in securing your finances. You may be healthy today, but accidents happen all the time, and not only could medical cover be the difference between life and death in an accident, it could protect your savings. I have had experience with this, where an accident cost me over Kshs 1 million in medical expenses. If I didn’t have insurance, I would have bankrupted myself and family trying to cater for this. At Kshs 40,000 in premiums annually, it will take me 25 years to have paid the equivalent of Kshs 1 million to my insurer. That is precious. The earlier in life you get a medical cover, the more you save, because the older you are when joining, the higher the premiums. This year, get a basic in-patient medical cover.

How do you pick the right insurer? It is difficult because every insurance company seems to have a couple of disgruntled customers. I personally recommend Resolution Health, not because they’re fault free, but because they’re very responsive to their clients, and their CEO is a tweet away. I have been their client for 4 years now, and I have very little to complain about. This is not a paid endorsement, just sharing my experience

2. Join a pension scheme. The main advantage of contributing to a registered pension scheme is that the contributions you make (up to Kshs 20,000 a month) are tax deductible, which means you reduce on the taxes you pay when you save. My recommendation is that you save at least 10% of your gross pay in a registered pension scheme.

Joining a pension scheme has several advantages: First, despite the fact that the rate of return may not be great, but when factor in the tax break, the return is significant and adds up. Secondly, it is wise to have your basic savings stashed away in an inaccessible account. Finally, though 10% may seem insignificant, with time it adds up and it can be amazing how much money you put aside even if you are in employment for just 5 years.

Again from personal experience, Jubilee Insurance have a good personal pension product, and they are very responsive.

3. Avoid late payment fees on your credit card and other bills.  Make 2013 about plugging holes through where your money leaks. If you have a credit card, avoid late payment fees by paying it off on time. Better still, pay off your entire credit card bill every month, avoiding interest fees too. They may seem insignificant, but again, these small costs add up.

4. Resolve not to borrow money at all. I am not totally anti-debt, especially where the debt is invested in a profitable venture. I however think most of us borrow for living expenses and luxuries, especially if the credit is readily available. We are accustomed to living above our means. For most of us, the borrowing cycle starts in January. After the holiday indulgence, you’re left with no money for your living expenses, so you borrow, and the cycle continues in subsequent months.

5. Start building an emergency fund. The rule of the thumb is to save at least 3 months expenses in a fund, which is supposed to insulate you should you lose your job, or income sources for a period. It is hoped that 3 months is sufficient time to put an alternative plan in place or get a job. If you feel you would need longer time, then work with 6 months. Assuming you have a budget in place, make a plan to keep aside this money starting January. The most important thing here is to set a deadline by which you should have saved this, depending on the amounts you are able to set aside every month.  Do not spend this money!

6. Start saving for the holidays now. Most of us are out of pocket in January because the holidays were a “total surprise” to our pockets. How much did you spend over the holiday period? I won’t advise you to reduce holiday spending, my advice is you divide that amount by 12, and set aside an equivalent every month. In January 2014, you will be one happy camper if you do.

That is my list of six, what other great things do you think we can do with our money this year? Share your thoughts by leaving a comment.