Financial Mistakes You Are Likely to Make This January

Think about 12 months from January; what would you like to have achieved? You might have a rough image of what it might be, or you might not have a clue. However, the potency of what you imagine depends on your decisions in January.

If you start making the right decisions in January, you will likely reach your goals by the end of the year. But if you start making bad decisions in January, you might set yourself up for a rough year.

This article explores some of the mistakes you will likely make in January that might have a trickle-down effect on your year.

Not Having a Plan in Place

If you fail to plan, then you are planning to fail. This is a cliche saying, but it holds. 

Sometimes, planning might seem like a cumbersome activity, but it is necessary. It is necessary because it helps you understand where you are coming from, where you are, and where you want to go.

As the year starts, you need to put in place a plan for how you want to approach it, especially financially. 

Planning involves three phases. The first one is the assessment part. Before you take on a new year, you must assess how you have conducted yourself in the previous year. You want to see what you did right, what you failed at, and where that has gotten you.

This brings us to the second step of planning. Understanding where you are at. How much do you have saved? How much debt do you have? What is your current income? In this stage, you do not look at your potential but the raw facts about what is and what is not.

The third phase of planning is why planning is essential. Considering the assessment you made of the previous year and your understanding of where you stand, where do you want to go? 

The assumption here is you want to be in a better place come the end of the year compared to where you are starting. If that is right, then planning is essential.

Planning is done in terms of goals. You have to set goals you want to achieve by the end of the year and the reverse engineer to figure out what you need to do. If you have 12 months to achieve your goals, what must you do monthly, weekly, or even daily to ensure the plan comes to life?

Hence, one of the biggest financial mistakes you can make in January is not having a plan.

Not Reassessing Your Saving Strategy

Having a saving strategy is recommended. Being able to set some money aside for your future use or investment is indicative of a healthy financial state.

First, if you do not have a saving strategy, it is high time you considered having one. A saving strategy is what guides you when it comes to setting aside money.

Without a saving strategy, it becomes difficult to save. Mostly, people without a saving strategy think that they will spend and save what remains, but in reality, very little or nothing remains after they spend. It is advisable to have a set plan of how much you will save before you even spend.

If you had a saving strategy, kudos to you. However, in January, it is time to reassess the plan and evaluate how effective the strategy has been and whether the strategy helped you achieve the goals that you had set out to achieve.

If not, then you can reassess why it never worked. If it worked, then congratulations. Nonetheless, you must adapt your current saving strategy to the new goals for the new year. 

If your income changes, it makes sense to adapt your saving quotas with the change in income. You might also need to adjust your lifestyle to accommodate your savings strategy.

Therefore, do not let January slide into February without reassessing your saving strategy.

Ignoring Your Retirement Plan

Investing in your retirement plan is one of the best investments you can make. When you are young, the thought of retirement is not one you ruminate about. However, this new year should be a clear indicator that time is passing, and with every new year, old age and, hence, retirement is approaching fast.

Hence, one of the recommended considerations you should make in January is having a retirement plan.

You can start by considering the National Social Security Fund (NSSF). The NSSF is a government-mandated social security scheme in Kenya. It requires employers and employees to contribute to the fund and provides retirement and social security benefits.

On the other hand, you can opt for a private plan. Many insurance companies offer different retirement products. You are required to make a monthly installment, and once you retire, you can start redeeming your investment in terms of retirement benefits.

Whichever direction you opt to choose, it is paramount that you have a retirement plan this January. You can only have so many new years before your retirement is knocking.

Putting Off Your Taxes

January is the best time to remit your taxes. In Kenya, the tax remittance deadline is usually June 31st. Kenyans are known to wait until the last minute and rush to file their returns. However, you can be proactive and ensure you finish your taxes in January. This allows you ample time to ensure you file accurate returns, saving the hustle of running around mid-year.

Admittedly, filing taxes is one of those activities that people would rather not do. But it is essential. Looking at it positively, it helps you to look at how much you made the previous year accurately. With this information, you can formulate a better plan for the starting year.

Not Paying Off Debt

If you have debt, you need to have a plan to repay that debt. Debt is usually given with an interest tied to it. Hence, it will keep ballooning if you do not attend to it. 

You do not want to make the mistake of neglecting your debt. 

First, you must understand how much you owe at what interest rate and factor in the timeline to repay the debt in full. Determine how much you need in installments and ensure you keep to your obligations.

If you realize that you might not be able to pay back the loan in the timeline set, ensure you speak to your creditor and figure out if you can restructure the loan or consolidate the loans if you have multiple.

Debt can become vicious when all you do is work to pay off debt. What you should understand about most debts is that when you pay, they pay back the interest first, and the principle remains the same. Hence, if you cannot repay the loan faster, you will keep paying without denting the principal. Which might make the loan bulge to unmanageable levels.

Biting More Than You Can Chew

January comes with a sense of optimism and expectation for the year. You set goals and are motivated to achieve them. You start a diet, start a savings plan, sign up for the gym, start meditating, and so on. 

With this enthusiasm, you might bite more than you can handle. Life transformation, including financial transformation, does not happen in a snap of a finger. It comes through long-term consistency.

Hence, when making yearly plans in January, you ought to be realistic and think about how you will build consistently rather than how to go from zero to 100 in one month.

Biting off more than you can chew can create humongous pressure that you might crash under within the first few months.

Do not make the mistake of biting off more than you can chew. Instead, think in incremental steps. Break down your goals into small, achievable tasks that will compound the big goal you aim for.

Wrapping Up

There are a lot of good things you can do in January to ensure that you have a productive year. However, you can also make some mistakes. Lacking a plan, not saving, not having a retirement plan, and assuming your taxes and debts are some of the mistakes you can make that can have detrimental effects on you.