As the year winds down, many people will be making resolutions to improve their finances for the coming year. According to a survey carried out by Fidelity Investments’ Annual Resolutions Study, about 67% of Americans would be resetting their financial goals and making new commitments.
Determining your goals is a great starting point to improving your finances, but thinking about them alone would not crystallize them into practical achievements. You have to take the required action to mark those checkboxes in your financial to-do list. Below is a list of goals you can consider to include in your financial resolutions.
Saving more money is the most obvious financial resolution that most people undertake . It is also the first step to unlocking financial independence. While most people intend to set more money aside for whatever investment reasons, most do not have the tenacity to see this truth. A lot of people see saving as a mechanical task that requires a lot of willpower.
One way to sidestep this is by inculcating a lifestyle of savings. Do not see this as a different attribute or behavior from yourself. Try to inculcate the habit of paying yourself first before you attend to other expenses and responsibilities. Only then would you be able to see through your financial resolution of saving more money.
You can set up an automatic savings feature on your account to help you. This way you don't have to bother yourself each month as your specified amount would be automatically deducted from your checking account and sent to your savings account.
Also, try to attach your savings to a goal. Doing so acts as a subtle reminder when you want to dip hands into your nest. It also instills a commitment in you to achieve your set target.
Your credit score not only determines the type of loan you would be eligible for, but also the interest you would pay. Lenders use your credit score to assess the level of your risk. A poor credit score (below 700) is a recipe for a more frustrating financial life. As such, improving your credit score is very important.
Credit score can be improved in a variety of ways which include: paying your bills on time and in full (which may include setting up autopay), paying off debt, limiting the number of credit cards you have, maintaining a fairly low card utilization ratio by cutting spending, etc.
Creating a budget is the first port of call for people who want to put their finances in order. A clear budget can help you set guidelines for what you can afford to spend.
The reason most people avoid creating or sticking to a budget is that they find it more constricting. However, it is better to get pinned down by a budget than a mountain of debt. Besides, if you are looking to shore up your savings, having a budget helps you identify areas you need to cut back on spending and save some extra cash.
Begin by listing all of your fixed costs, including rent/mortgage, phone, grocery, and savings. Then you can see how much money you have leftover to spend on things like restaurants, clothing, and entertainment.
Perusing your credit card statement is a convenient way of tracking all of your expenses in one location. Furthermore, most cards allow you to evaluate your entire annual expenditure by category, which is extremely useful when creating a new year's budget.
Starting an investment should be top on the priority list of financial resolutions going into the new year. This is a shift in gear from savings as this pits your money to work for you. Most people procrastinate about investing due to fear and lack of discipline.
To most people, it is unthinkable keeping money away for 10 - 20 years. However, this is a short-sighted approach to managing money. Firstly, you have to realize that whether you invest the money or not, the time will always pass.
Secondly, you have to invest in what you know. As such, before you take the plunge, you have to earmark adequate time and resources for self-education and due diligence. When investing, avoid getting rich quick schemes at all costs. Play the long game and long at the bigger picture, you would accumulate more by holding a position for a decade than trying to time the market or price action of assets.
You can set a monthly investment plan whereby you set aside x amount of dollars every month. Like savings, your investment should be attached to goals, but you also have to cognize your point in the journey of life. A 50-year old has different investment goals from a 20-year old. Identify what suits your particular need and go for it. Index funds are a good place to start investing for most investors. When you have made your bones, you can branch out to more aggressive assets.
There is no true way to measure financial freedom other than looking at your debt profile. Many people have used debt as a band-aid to treat their ailing finances. Their drowning financial state is buoyed by debt. Taking on debt means that you are robbing your future self. You are discounting the opportunity cost of the future for the present. Guess what, the future always comes, and that is when reckoning sets in.
Many people in their 60s are reeling from the financial mistakes of their younger years. The worrisome part is that these people are not as productive as they used to be when they were younger and as such can't earn more income. This is why it is expedient to tackle debt at an early age as soon as possible.
Have a plan to pay off your debt and stock it no matter what. You can use debt repayment strategies such as debt snowball or debt avalanche to pay off your debts. Whenever possible, increase your monthly contributions as this would go a long way in reducing the principal and interest accrued.
Make it a target each month to reduce debt no matter how small. Avoid taking on new debt like applying for a new credit card or mortgage. It requires a huge financial sacrifice to eradicate debt from your personal finance, but it is well worth it.
This may feel like a chore, but it’s a smart financial chore to do. You may want to reconsider your insurance choices at the beginning of each year, to take away some dead weight to give your loved ones more financial protection.
Take a close look at your home or vehicle insurance policy during the open enrollment, in addition to your health insurance options. Have you had those policies in place for a long time? Perhaps you're overpaying on your premiums?
It may also be a good idea to get some insurance. Do you and your dependants have life insurance? Have the beneficiaries been set up appropriately? These scenarios may seem like a distant occurrence because everyone likes to believe that they are immune to tragic occurrences in life. However, it is always better to be prepared than sorry
Personal finance experts idolize coffee shops that used to be the poster child of money mismanagement. However, in recent years, subscriptions are posing a greater threat to your financial independence.
Examine all of your subscriptions to determine if there are any that you may cancel. It happens all the time: you sign up for a free 30-day trial and then forget to cancel before it expires. You promise yourself that you'll cancel the subscription before the next automatic withdrawal, but life gets in the way, and you forget. You should keep track of everything from cosmetics to meal arrangements, not just entertainment streaming subscriptions.
Getting your child into college is a huge milestone for many parents. However not many have the financial wherewithal to see this through. As a result, many people resort to debt to finance their way through college. However, a lot of people are finding out that the cost of education may be too expensive to bear.
Student loan is now preventing millennials and Gen Zs from achieving life milestones such as buying a car or house. Many people have to work for decades to pay off their loans. Thus, student loans may well impede financial independence.
One way to curb this is by starting a 529 plan for your child. This is a tax-advantaged savings plan designed to encourage saving for future education costs. Starting a 529 plan not only ensures that you can put your child through college, but also reduces the burden that comes with paying tuition which is constantly on the rise. As such, when your child is in college you can channel your financial resources to other productive projects
Death is an inevitable feature of life. As such it is only logical to make preparations to ensure that your loved ones and dependants are adequately catered for when you are no longer present in physical form. One of such ways is by having a will, especially if you have a lot of assets. Avoidance of such, many put your family into turmoil as members would be scrambling for assets.
To begin preparing a will, make a list of your assets and obligations. Include the contents of safe deposit boxes, family heirlooms, and any other assets you want to give to a specific person or entity. Get a reliable and experienced attorney to help you draft a will. You can choose to update the will periodically or as life situations permit. be clear about who gets what and how much.
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