COVID-19 has disrupted the lives of many Jamaicans, making 2020 one of the most difficult years in recent history. The sudden disruptions caused by the public health crisis have presented economic and social challenges with growing repercussions.
“This has left thousands without jobs or with reduced income, due to the sudden closure of several businesses. The resulting financial hardships for numerous families have come at a time when more resources are required to respond to and fight the pandemic,” said Rose Miller, head of the JN BeWi$e Financial Empowerment Programme.
Mrs Miller noted that it is partly for this reason that many Jamaicans see the New Year as a welcomed fresh start.
“Now, more than ever before, this New Year is seen as a way for many people to pick up the pieces. 2021 is an opportunity to revive aspects of their lives, which have been drastically altered or shattered.”
She said one of the main areas that many people often single out for real intervention at the start of any new year is their financial wellbeing or development.
Here are some financial changes you should resolve to make this year:
Calculate Your Net Worth
If they haven’t done so already, the New Year is as good a time as any for persons to determine their financial worth. An individual’s net worth is simply the value of their assets minus their liabilities.
“Knowing your net worth is a key step to assessing your financial health,” the JN Foundation grants manager said. She noted that if persons can identify all their assets and liabilities it helps them to create a clear picture of their financial position.
“It’s a good idea to recalculate your net worth each year to keep on top of your progress towards your financial goals, increasing your assets or reducing your liabilities will result in a positive net worth. Many websites, including Investopedia, offer free tools to help persons calculate their net worth and track their progress,” Mrs Miller informed.
Reassess Your Retirement Planning
This is another area which needs urgent attention, Mrs Miller pointed out. “If you are self-employed and not yet enrolled in a pension scheme, it is one of the gifts you should deliver to yourself in 2021,” she advised.
For those who have access to a retirement scheme through their employers, but are not yet contributing the maximum 20 per cent of their income, Mrs Miller said this year is the time to consider instructing your human resources department to withhold enough through salary deduction to ensure that you reach the maximum limit.
“Of course, you should save only amounts that you can realistically afford, as contributing more than you can afford may result in having to incur debts to cover everyday expenses. To determine how much you can save each period, incorporate your retirement savings into your regular budget,” she advised.
Plan to Pay Down Debts
Mrs Miller also advised persons to take some time to reset how much they plan to pay on their existing personal loans, debts, and home mortgage accounts.
“Paying an extra amount towards the principal balance on your mortgage is a great idea. Check with your mortgage company to find out how often they allow these lump-sum payments and take advantage of the opportunity. By doing so, you’ll cut down on the number of years it will take to pay off your mortgage and this can result in substantial savings,” she said.
She also noted that persons with credit card debt should make every effort to steadily clear this debt, as it is usually a high interest debt that is not easily eliminated without discipline and sharp focus. “For best results, try not to charge additional purchases on those cards while you’re trying to pay down what you owe,” she advised.
Review Your Credit Report
Persons are also encouraged to check their credit report regularly to ensure its accuracy and, where necessary, take steps to repair any negative aspects.
“Now that you’re entitled to one free credit report each year, there is no excuse for not reviewing what is one of your most important financial statements, especially since errors in these reports are not uncommon,” Mrs Miller said.
She noted that by getting one free copy a year from the three reporting agencies it is now much easier to keep tabs on your credit report. A poor credit report could adversely affect the amount a person is able to save, as it could result in them paying higher interest rates on loans, which reduces their disposable income.
Mrs Miller cautioned against setting too many or unrealistic financial goals for the New Year. “Otherwise, you may be unable to accomplish any of them,” she said. “Take this opportunity to restate your financial resolutions simply and clearly. It may be a good idea to maintain a checklist to keep track of how you are doing throughout the year so that you can make any necessary modifications. Consider meeting with your financial advisor to review the goals and objectives that you have established and devise a solid action plan to achieve them.