Just like that 2021 is winding down, and it is time to reflect and take stock of your financial performance this year.
While you can't undo the money mistakes of the past year, they can be used as a learning point to begin the new year on the right financial footing. Planning ahead makes a significant difference in achieving your financial goals.
Apart from setting you on the right path, it also gives you a clear picture of your intended goals. Outlining your financial goals early also allows you to evaluate your progress.
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Procrastination has held many people back from achieving their financial goals this year.
The fear of the unknown has crippled many from taking their first steps towards financial independence. The fact remains that time is an invaluable resource that waits for no one. Whether you choose to get started or not, time will still pass.
So why not get started and make use of that time? Whether it is setting up a 529 savings plan for your child, opening a brokerage account, or drafting your will, the key to achieving anything is by getting started.
You may have been through an event in your life that has influenced your financial perspective.
As a result, you now function from that mental space, resulting in less-than-desirable outcomes. Many people approach their financial goals from a 'scarcity' mindset, the type that tries to prevent the loss of money, instead of embracing the risks that would bring financial rewards.
Others believe that you need huge capital before investing can be worthwhile.
Such thought patterns are cultivated by a lifestyle of "paycheck to paycheck," which entails scarcity as the money earned never seems enough to handle present needs. This is the reason people do not set aside some funds to invest because they have pressing needs to meet.
Operating in this mindset significantly affects your potential to eclipse your present financial status. You would only be reinventing the wheel when it comes to your finances. By this, we mean, spending your money or using debt to meet your necessities.
While there are emotional components when it comes to money, the type of mindset you maintain is a key factor in determining how you would grow financially. Rather than employing a defensive mindset, you can flip it and embrace an opportunistic one that is more profit-driven.
See money as a messenger, rather than a master whom you must slave for. Recognize that any little money saved today would accrue to big amounts in the future. Believe that there is money to be made, but you must be ready to put in the work and invest smarter.
Your thoughts lead to actions, and actions over time evolve into habits, which set precedence for your character.
Setting yourself up for more financial success in 2022 entails reevaluating your money habits.
Examining your money habits can change your perspective on money and how you approach your finances.
Looking through your budget helps you find out how you spent your money the previous year.
Examine your credit card bills; many lenders will break down your costs for you by category. Look for areas where you may make changes for the following year.
If you need more money, you can consider starting a side business, asking for a raise, or looking for a new job. But bear in mind that earning more money does not automatically translate to financial independence unless you develop the right mindset on money management.
The end of the year is a good time to review and rebalance your portfolio.
Perhaps this has never been more expedient than this present time as the Federal Reserve is set to increase interest rates at least 3 times next year.
As such, you have to readjust your portfolio to accommodate the changes in monetary policy. If you are overweight on growth and tech stocks, you may have to consider trimming your position in high-growth companies and buying more into economically sensitive sectors such as real estate or bonds.
Alternatively, you can look at emerging markets to give you a hedge against volatility. The key is reviewing your investment portfolio in light of the prevailing economic factors so that you do not incur losses.
Setting up automatic savings or investments is a viable way of bypassing character flaws associated with money.
If you find yourself to be an impulsive spender, this can be a good way of mitigating such a habit and keeping yourself on a tight budget. By setting up automatic transfers from your checking account, you can keep your financial life on track.
The key thing is using an amount you can afford so that you would not be tempted to rescind your earlier decision.
The end of the year is a time for reflection, but it is also an opportunity to reevaluate your financial goals and get yourself back on track. While mistakes are often painful and regrettable, it also presents a learning curve that can make you better financially.
Applying some of the tips above can help you kickstart the new year in a more financially astute way. But you must be ready to put in the work and embrace the required changes that would make this idea plausible.
However, remember that if you choose to delay or procrastinate making the necessary changes to move your finances to the next left, time would still pass. Why not make hay while the sun is still shining?
June 30, 2022