This year onward, where do you see yourself heading with the finances? What are your plans? Do you want to save more, clear off that debt, or just get better with money? Many of you quite be starting 2020 with a lot of hopes, plans, and dreams of improving your financial situation.
The plan could be unaffected by paying off debts, cut down unnecessary payments, save and invest more, and manage money matters in general. So, new year, new finances, right?
The early days of a new year could be the best time to sit back, relax, and plan for healthier finances for the entire year. Despite the uniqueness of every financial situation, you may be, this is the right time to evaluate and make simple steps to follow to make your life easier.
Before you could start, it’s essential that you review your 2019 goals and spendings to strive for better financial health. You must first analyze the financial state you were in the previous year and what you pen down the areas of improvement. Hence, take some time out of your busy routine and ask yourself these basic/general questions while you are planning to make some changes with the financial status. While everything is still fresh, this is what you can ask yourself:
- How much did you manage to save?
- How much did you invest?
- Did your investments grow? How much?
- Did you overspend and if it was worthwhile?
- Did you go under debt? Why? Evaluate the reasons and come up with solutions
- Did you save up enough for short-term and long-term goals?
- Did you manage to save up for retirement? And so, on.
Once you have answered these questions honestly, there will be no need to deny or feel guilty about; instead, take note of the things you did right and continue doing that. And the things that were unproductively done list them down to understand what and why it prevented you from saving towards your goals. Once you have done this, do best to make some amendments accordingly, so you do not repeat the same mistakes.
As you were looking back in 2019, also consider how you would define money management skills going forward. This will help you set re-define and set financial milestones for you to achieve without any regrets. Find out if you are more of a saver or a spender and work out a plan that is best for your finances to become steady and healthy. Whatever you decide, make sure that you include a project where you have developed both short-term and long-term goals and stick to it. This does not only cuts down your financial stress but also helps you achieve commercial success. This year, commit to doing more than just talking. Try walking the walk, and you will see the lifestyle changes that will be very impactful too. Aspire to build a better wealth, get organized, and follow some things that will improve your financial health overall.
The good news is that you do not have to go to the gym or skip a meal, all you have to do is follow and adhere to these simple tips to get your finances in better shape in 2020.
- Save More Than You Spend
Undoubtedly, one of the top financial resolutions is to save more and to do this, and a planned budget is a must. The budget is a plan that decides how much you can save and spend your money. There are countless methods to save and cut back unnecessary spending, and a program will enable you to know where you can spend your money and how much can be controlled. Take time out to write down how you are spending and see where best you can cut down to save more!
Firstly, define your expenses – fixed ones that include rent, mobile bills, car payments, etc. Secondly, variable expenses such as groceries, fuel, and other utilities. And finally, periodic fees include travel, celebrations, and additional costs that occur on an irregular basis. After defining, calculate what you can change and where you can reduce to free up some income for saving more.
Tip: Minimize what you are spending on variable expenses.
- Get Clear Goals This 2020
While you followed the goals previously, try to enhance them a bit more this year. Prioritize what your short-term and long-term goals are and how much money you will require to keep aside to achieve them. Develop a clear vision of understanding where you financially stand as of this year and where you want to be next year. This way, you will be able to craft a budget plan that suits your financial needs. Short-term goals can be anything that you would like to achieve shortly.
For example, you have been planning that Europe trip for a year now, make sure to include as a short-term goal and continue to boost your savings towards it. Other targets could consist of applying moe towards retirement, paying off debts, saving for the next six months for emergencies, etc. Listing down your goals one-by-one can enable you to save the budget for that specific goal accordingly.
Tip: Moving in a positive direction will make you more confident in managing money. Create healthy financial behavior.
- Check your credit score and increase it.
If your credit score is below 700, make it a priority to increase it in 2020. You can raise this number in many ways by paying off your bills on time and in full, clearing off pending debts, cutting down on the spending, incorrect balances, and limiting the number of accounts you have open. Look for any negative entries that can impact your credit rankings and try improving it. Consider the impact and identify the compromises that you took in 2019; it pays to be safe than sorry. Do note that money lending companies take credit scores very seriously, and if you have a lower rating, it might be preventing you from obtaining a reasonable loan.
Tip: Good scores get the best interest rates.
- Clear your debts
If you have pending debts to pay off, clear that immediately. If you have taken a loan for education or house or have used your credit card, it is time to reduce by earning some extra money through freelancing/part-time work, which will help contribute to the overall income. Do not spend the entire money you earn on buying new things, instead of clear the debts with it so you can save more later. Developing a new skill and making extra money can help you cut down some of your debts. Credit card interests are quite a lot, free up some income in your budget to get the debts paid off. The sooner you do that, the more you can save in your pockets and less you will spend out of pocket on silly fees and interests.
Tip: Avoid carrying a balance. Use credit, but make sure you clear it off every month.
- Increase the amount you save for emergency fund
Are you already saving for an emergency fund? If yes, it is time to raise the bar towards saving more for emergencies. Based on your income, try to save something, anything every month for emergency expenses. This could include medical bills or other actual emergencies. With often speculation around the recession, keeping some cash handy for these emergencies will help you avoid leaning towards different saving categories or credit cards.
Tip: Saving little or less money as an emergency fund can help you pay off the urgent bills on the spot and avoid a backlog of repayments.
- Boost what you save for retirement
Similar to an emergency fund, it is imperative that you save for retirement too. If you save more, it will only bump up your contributions for the future and build a steady wealth at the time of retirement years. Saving money now will only keep you well prepared for the years ahead, which will be less stressful and more easy-going. Remember that you would not be working, so it is better to clear all pending payments as well too. Keep aside a small amount from your monthly income and remember the impact of compound interest also. This will help you to know and understand how money grows over time. While you are currently working, take advantage of the tax benefits which can contribute to the retirement plans too.
Tip: Save at least 15% of your income toward retirement. Consider keeping aside your pay increase or a bonus for the future.
Financial success does not happen overnight. It takes determination, discipline, and courage to bring about a change in your lifestyle. If you are just a beginner and not sure where you want to be financial, resolve this now to do better the next year. Moreover, to help you advance your knowledge of financial matters, you can consider reading some books on personal finance too.
Aahna Gandhi is an enthusiast traveller, writer and a PR Professional. She likes sharing memorable moments from her travels and inspire others to live a life full of wonder. Known for her content, she has worked for travel, technology, lifestyle, health sectors as well as finance.
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