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"This is particularly critical in times of economic challenge and political uncertainty – on both a local and global level – that many expect to play out in 2019. Looking back at your past financial year gives you broad insights into your financial decisions, which should guide you on how to improve these going forward."
Hindsight enables you to focus on the accumulated impact of your financial decisions for the year, she adds. "For example, a few out-of-budget takeouts during the month may not be a big deal, but the total sum of all these takeouts over a year can add up to a significant amount."
Naicker encourages a thorough review of your 2018 financial goals and your progress, and comparing these to your financial behaviour throughout the course of the year. "It’s important to remember what you had set out to do, and measure this against what you actually did."
Old Mutual’s 22seven app can be useful in this exercise. Downloading the app and linking your banking, investment and savings accounts will create a complete view of your spending and savings patterns in 2018.
"Information is power. It can be surprisingly insightful reflecting on your own habits objectively. Not only will you uncover your money habits, but you’ll also be able to assess your habits against your priorities and values. Applied well, this could help you make not just better financial decisions but perhaps even better life decisions," says Naicker.
Naicker says that in hindsight it is also easier to recognise some potential detours to reaching your financial goals that you did not anticipate at the start of the year. "Though the local economy was described by some analysts as looking bleak at the beginning of the year, many did not expect the economy to enter into a technical recession in 2018. The VAT increase and the hikes in both interest rates and fuel also caught many off guard." Simply planning ahead can help minimize these impacts.
If the technology options do not appeal to you, Naicker says a simple pen and paper exercise is also effective. "Make a note of your total income for the year and another one of your expenditure. Use different colours for these figures. Then break down your expenditure to cost per item for each month. Calculate the total figure per item for the year. For example, say groceries cost you R2 500 per month, use this number to calculate your total spend on groceries by the end of the year, which would be R30 000.
"Once you have worked out the annual cost per regular expenditure item, it is important to calculate the cost to income ratio. For example, if you earn R25 000 per month after tax (R300 000 per annum), a R30 000 annual grocery bill equates to 10% of your annual income.
"However, for regular tracking, deeper insights, and much less admin tools like 22seven can help you track your budget effortlessly."
"This kind of detail provides a visual representation of how your income is apportioned, where you are choosing (consciously or impulsively) to spend, and the potential opportunity cost to your goals", says Naicker.
"This picture can be a powerful tool to achieve financial wellbeing. Fundamentally, financial wellness is about enjoying your most preferred current lifestyle whilst still enabling your future aspirations and goals. "
After reviewing the year, Naicker suggests you put together a brief list of what worked and what didn’t, and then use these insights to plan for the upcoming financial year. "The time is now to dust yourself off and gear up for your next financial year, for which you are already better prepared. If you’re unsure or worried about where to start, seek out professional financial advice. A partnership like this can make 2019 your best money year yet."