Every year comes with new expectations, aspirations and decisions (even if your decision is to do as well as you did the year before). Whatever your plans, they are not complete if they do not address your finances in a practical way. In order to really have a successful year, which you’d look back and be proud of, you will need to get your money making and money spending right. The following are seven crucial money habits you must do this year:
To pay yourself first, do a serious analysis of all your monthly expenses. We usually spend money thinking all our expenses are worth it. A real review will reveal things that you can potentially reduce and then use that number as the amount you take out first and save for yourself instead.
2. Cut Down Unnecessary Expenses: The analysis you make is as simple as writing down the expenses and take an in-depth look at it. Start out with the aim to keep the necessary spending and cut out the unnecessary ones. Add the rest to your saving percentage. Check if you can spend less to get the same result. For instance, how much do you spend every month on transportation, food, or dry cleaning? You might want to try doing the laundry yourself of all those three … because transportation and food are staple expenses. All these and other simple tips will reduce the amount you spend and make way for improved monthly saving.
3. Start Freeing Yourself from Debts: Begin by reducing the debts one step at a time, because many of us have already accumulated a high debt load. If your debts range from a mortgage, car loan, and credit card, you can start by reducing how much you owe gradually. Organize the loans by which has the highest to the lowest interest rate. Start paying down on the one with the higher rate to improve your overall financial picture. Commit yourself to increase your monthly mortgage and car loan payments. If you are consistent in doing this, you will in no time see a significant reduction in your debt profile.
Another option is to pay on the loans with the least interest and refinance or shift the credit balance of high interest credit cards to lower interest ones. This way you are shifting debt in your favor and paying against lower interest responsibilities which will improve your overall credit worthiness. This approach is not right for everyone and you may want to speak to a banker or a financial planner directly about your options.
4. Have an Emergency Fund: Some financial experts believe it is always good to have at least 6 months of your current salary socked away in your bank for emergencies (you might even go higher to ensure you’re prepared for anything). You never know when you would need to settle urgent medical bills, carry out urgent home and car repairs. There are even folks who are starting to create disaster funds due to global warming; hoping to protect themselves against floods, wildfires and hurricanes.
While you might have medical insurance, you never know when unexpected situations arise that will take you or love ones off their feet for extended periods of time (which may affect their overall income). Also, a few unplanned home repairs may take a deep cut in your cash on hand. So, an emergency fund would come in handy in situations like those and shield you from mounting bills.
5. Consider Side Income: Do you always have some free hours after work? You might want to consider converting those free moments into money-making time. You could spend evenings or mornings making extra cash for yourself. Not necessarily an option for everyone, but a short-term way to gain extra cash can settle some bills which ordinarily you would have been directly out of your regular income.
6. Budget, Budget, Budget: Having and keeping to a budget is another important habit that is a must. Plan and draft your budget, be very realistic and don’t make things overly tight for yourself. For it to work, it is essential that you consider your wellbeing as you can’t deny your basic needs. Think of your must-have basics (food, shelter, childcare); add a little bit for your discretionary spending (movies, eating out, vacations, etc.), and of course, savings. Then the most important part … stick to it for at least 6 months and then evaluate. Repeat the process, make adjustments and start the next 6 months. Can you put a little more away? Can you do without the movies and the restaurants?
7. Look into Investment Advice: I am not advocating you sign up with a banking or broker agent. They are really expensive and charge a lot of fees. Plus, they don’t always know what they are talking about and push investment products to make their sales numbers. No, I am talking about educating yourself through online financial courses or use apps that may help you invest better. Apps like Stash, Acorns and Tradewyse can help you make better decisions about saving or investing your money.
This year, promise yourself the time to achieve a whole lot. You can’t afford to procrastinate, commit to these habits and you will make it happen, I believe in you!
With all the technology available, it is imperative these days to use an app to manage your money – heres why!
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