Photo by Joslyn Pickens
With each new year comes the resolutions. If you ask people about their New Year resolutions, you would probably hear things like – going to the gym, healthy living, learning something new, weight watching, and so on. Great resolutions you might say, but there’s another important one that people often overlook – financial fitness. It all starts with forming good money habits while dropping off the bad ones.
As we begin the new year, now is the perfect time to reflect on your financial habits in the past year. Are you proud of the decisions you made and how much you have in your bank account? If your answer is no, it is not too late to start healthy financial habits for a more secure and prosperous future. Are you ready to take charge of your financial future? Here are the best practices for boosting your wealth and taking charge this year.
Set Realistic Financial Goals
At the start of the new year, people always write down their goals. When it comes to your finances, this is an important step. While setting your financial goals for the year, be realistic. Meaning, whatever you hope to achieve should be attainable and within your current financial framework. For example, your goal cannot be to save a million dollars a year when you do not even earn that in a year. A more realistic goal is aiming to save a percentage of your salary each month.
Track Your Expenses
A spreadsheet can help you to keep a record of every dollar you spend. This helps you identify what is taking up your funds and areas where you need to cut back if necessary. Are you spending more on impulse buying? Are there things you are spending on that you can do without? Keeping track of where your money goes will help you make informed decisions about your spending habits. Eliminating the unnecessary spending will lead to more savings. Remember every dollar counts.
Live Within Your Means
How much are you earning and how much are you spending? You cannot be earning $1000 and spending $1500. You might feel tempted to spend all your money on things that make you happy at the moment because of YOLO (You Only Live Once). You might also be tempted to keep up with the Joneses, forgetting you may not be earning as much as they do and putting yourself in unnecessary debt. If you can learn to live within your means, you are one step closer to achieving financial fitness.
Create A Budget That Works
A budget is more than just a spreadsheet or an app; it is the key to living within your means and achieving your financial goals. It helps you plan and make better decisions about your money. You may be spending more than you make in a month without realizing it, leading to a life of debt and poor credit. But with budgeting, you know how much money is coming in and going out of your accounts each month. It is not just about creating a budget, make sure you also stick to it. Having a budget is an important habit that can help you in achieving your financial goals.
Debt Management
Debt, a reality for many, can be a significant barrier to one’s financial success. If you can help it, avoid accruing debt. If you are already in debt, prioritize paying them off. Start by making a list of all your debts. Identify the ones with the highest interest rate and settle them first while making minimum payments on the rest. While taking care of your old debt, do not incur new ones, no matter the temptation. You’ll be one step closer to financial success if you know how to manage debts.
Invest
Do you want to grow your wealth over time? One of the smartest financial habits to help you achieve this is making your money work harder for you. You have the opportunity to grow your money faster by making smart investments than saving alone. Investing is not for the wealthy alone; you can start from the little you have. You don’t need a lot of money or expertise to start investing. Take advantage of investment opportunities. Spread your investments across different asset classes, whether it’s stocks, mutual funds, real estate, or bonds, to reduce risk. Seek guidance if needed and invest based on your risk tolerance and long-term goals.
Have An Emergency Fund
This is the money you never touch unless the unexpected comes up. Life is unpredictable, and anything can happen at anything without any warning. Start setting aside money for emergencies, even if it’s only a small amount from your salary. An emergency fund is a critical safety net that is there to protect you when the unexpected hits. It helps you cover unexpected expenses, so you don’t dip into your funds designated for other things. Experts suggest having an emergency fund that covers three to six months of living expenses. Having this fund provides peace of mind during unexpected financial crises.
Remember this: The perfect time to reflect on your financial habits and set new money resolutions is now. You will be that much closer to achieving your financial goals once you commit to following these tips. All that matters is that you start.
