A new year is always a good time to start to make a difference in our lives. Most people feel hopeful and motivated to have the best year ever, I know you are too! This is also an excellent time for people to set resolutions to change an undesired trait or behavior, to accomplish a personal goal or improve our life.
So, have you made your New Year’s Resolutions yet? And, did you include any money or financial matter? Now is the perfect opportunity to make solid financial resolutions to help you get closer to your short-term or long-term money goals. Here are some of the financial new year’s resolutions you can start today:
1. Start Budgeting
I always mention that establishing a budget and sticking to it is the best way to be in control of your finances. I highly recommend that you start to budget your money this year. In budgeting, it is also where you can set your goals. The goal should be clear in your head, concise and specific. Then, track your expenses, list your income, set a spending plan and limit and you’ll be glad to be aware of how much money you have, where it went and where it needs to go for you to achieve your goals.
Budgeting can be really simple. You can simplify the process by using percentages of your income to cover your set expenses, savings amounts and your spending money. You can also follow the popular savings rule of thumb – 50/30/20 where you should put 50 percent of your income toward necessities, like housing and bills, 30 percent to wants, like dining or entertainment, and finally, 29 percent to savings or financial goals.
2. Automate Your Savings
Automating your savings is a great way to ensure that you are paying yourself first before having any spending. Decide how much you want to save each month, for example, 5, 10 or 20% of your monthly income. Set aside that amount have the funds automatically deducted via a direct debit into a savings, money market or mutual fund account. This saves time because savings becomes a recurring monthly expense and you’ll have peace of mind that you’ll meet your savings target/goal for this year. Here are major banks who offer automatic transfers to savings or investment accounts:
3. Build an Emergency Fund
An emergency fund is one of the foundations of a stable financial plan and it is a must-have, particularly during times of financial challenge due to the unexpected events. The basic rule of thumb for emergency fund is to build it with at least 3 – 6 months’ worth of your expenses in an accessible savings account. This will serve as a financial cushion if you will face sudden and unexpected events such as job loss and medical expenses.
Learn more: 10 Tips to Build Your Emergency Fund Fast
4. Deal with Your Debts
Start being committed to paying off your debts especially bad debts from credit cards or personal loans and be debt-free this year. You should prioritize paying off your credit card balance that has the highest interest while also making regular minimum payments each month with your other cards. If budget permits, it is advisable to pay more than the minimum monthly amount, or make weekly payments instead of just once a month. It is also important that you refrain from using your credit card for small and unnecessary purchases until you have your finances under control.
5. Invest for Your Future
Once you have some savings and have your debt under control, consider investing in the stock market through VULs or Mutual funds to build your retirement fund. Remember, when planning for retirement, the earlier you start saving and investing, the better off you’ll be, Investing can help you let compound interest — the ability of your assets to generate earnings, which are reinvested to generate their own earnings — have an opportunity to work in your favor.
Learn more: 6 Steps to Financial Freedom Come Retirement
6. Protect Yourself with Insurance
You are your family’s greatest asset. If you are the primary breadwinner of your family, or if you have dependents, you might want to consider having adequate cover for your health and life. Life Insurance is one of the pillars of personal finance and it is about protecting your income. Even if you are single, you might need life insurance especially if you have debts to pay. The proceeds from your life insurance policy can be used by your loved ones to pay for your funeral costs, pay monthly living expenses, continue a family business, send your child to college one day, should anything happen to you.
Buying a life insurance for yourself is not as costly as you think. You only need to pay a small amount of premium regularly in exchange for the coverage that the insurance company will provide.
Learn More: Life Insurance 101
7. Read a Personal Finance Book each Month
“If You Think Investment Education Is Expensive, Just Try Ignorance.” Financial literacy is the essential skill you must develop if your goal is to build wealth and enjoy financial security and you can do this by spending time to read financial help books or personal finance e-books on the internet. My personal preference is still printed books though rather than e-books simply because there is something intimately rustic about the entire experience of reading printed ones. But e-books are also great and they are easily accessible.
Learn More: The 10 Best Personal Finance Books to Buy in 2019
8. Track your Expenses using an App
Understanding your spending habits is the crucial first step to get to your financial goals or wherever you want to go with your money. Tracking spending brings you awareness of your attitude towards money – what you spend, how much you spend and why you spend. It can be eye-opening experience to learn the reality of your financial situation and why you are not able to save for your goals.
There are many apps available for your mobile phones that lets you track your expenses. Most are free and some offer features with premium. My personal favorite is Money Lover. It is a useful tool with great interface. It lets you set and control budgets and have intuitive reports and charts available in just a tap of your phone. You can also set up your bank accounts, and create your own expense categories with cute icons and even manage your debt and loan categories.
9. Cut Back on Bad Money Habits
Breaking the bad money habits is just as important as establishing the good ones. Take a moment to identify a bad financial habit, for example, eating out too often, dipping into your savings, buying coffee everyday, splurging money for clothes; and promise to yourself to eradicate it this year. These bad money habits can potentially cost you thousands of money which you can instead invest for your retirement or save for a down payment on that dream home. Consider also enlisting a buddy or significant other to support you and keep you reminded of your money goals.
Good luck and have a fruitful year!