Make Financial Resolutions with Actionable Plans

Healthy finances are not just about how much you earn, but also how you manage it. If your savings are running low and debt is piling up, it's time to set a financial resolution for a more stable and planned financial life.

The new year is often an opportunity to resolve your financial condition. So that it's not just wishful thinking, here are the steps to making realistic and achievable financial resolutions.

1. Monthly Budget Evaluation

Analyze your cash flow over the past year and identify financial habits that need improvement. Design a budget that prioritizes key needs, including investments, and make a commitment to stick to it.

2. Debt Management

Reduce debt only for urgent needs, not to fulfill prestige. Total installments should not exceed 30% of your income. Consider debt repayment strategies such as snowball (paying off the smallest debt first) or avalanche (paying off the debt with the highest interest rate first). Don't end up robbing Peter to pay Paul!

3. Use SMART Method

Financial resolutions must be Specific, Measurable, Achievable, Relevant, and Time-bound.

Example:

• Saving for an emergency fund of Rp5 million by setting aside Rp500 thousand per month within 10 months.

• Invest in blue chip stocks regularly 1 lot per month for 1 full year.

4. Rule of 100 Investing

Confused about which investment product suits your risk profile? Try subtracting 100 from your current age, that's the percentage of assets that can be allocated to high-risk instruments like stocks.

For example, if you are 25 years old, then (100-25) = 75% of your investment budget can be allocated to stocks, while the remaining 25% can go to mutual funds or bonds.

Keep in mind that asset allocation tricks like the rule of 100 should always be accompanied by the development of investment insights.

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Disclaimer: The content is made for educational purposes, not a recommendation to buy or sell a particular stock. PT KAF Sekuritas Indonesia is licensed and supervised by the Financial Services Authority (OJK).