It is a brand new year, which also makes it an opportune time to set some brand new goals for yourself! Some of you have resolved to get fit and eat a healthier diet, while others are learning a new skill. These are all admirable goals, but have you thought about setting up some financial resolutions for the new year?
Money resolutions are meant to help you save more and pay off any debt you might have, putting you on the right track to achieving financial prosperity. Are you wondering what financial resolutions to adopt? Here are a few that you might want to consider.
Gain new sources of income
There is always a risk of losing your source of income out of the blue. This is where having a back-up plan comes in handy. Diversifying your income can go a long way in securing your financial future, ensuring that you are not entirely dependent on a single source of income.
Having multiple income streams will ensure you don’t have to worry about missing bills, struggling to save or going into debt. It will most certainly help you to achieve financial goals faster, build wealth, and even possibly retire earlier.
Re-evaluate your budget
If you want to save more money in 2023, then it is time to take another look at your budget. Your new and improved budget should be adjusted to reflect your new goals. To achieve this, you must first decide how much you want to save by the end of 2023. For example, if you are looking to save 15% of your income every month, then you need to devise a realistic budget to stick to in order to spend the remainder efficiently.
Some budgeting tips include:
- Slashing unnecessary spending
- Account for all your expenses
- Avoid purchasing consumer goods via credit
- Make your budget fit your lifestyle
- Automate your finances
Keep your cash where it will grow
Savings are undoubtedly useful and everyone should have them. But for the most part, most savings accounts will have very low interest rates, meaning your cash will not grow very much over time. If you haven’t already, you will want to start looking into places where your money can grow to not only keep up with inflation, but beat it entirely.
Wealth-generating investments such as treasury bonds & bills, money market funds, robo advisors, and unit trust funds can offer higher returns than savings accounts. If you have a higher risk tolerance than others, you can start aiming at investments with even higher returns, such as equity funds, REITs, or corporate bonds.
Try to live below your means
Sometimes, we end up spending more than we earn in a month. This can be due to any number of reasons. Perhaps there were emergency medical costs or unforeseen maintenance costs on your home. But if you find yourself overspending because you may have gone a little wild while shopping, then you may want to take another look at your finances.
To live below your means is to lead a comfortable lifestyle you can afford while saving a portion of your income for future use. It is not just about going full frugal hermit and avoiding debt, it also involves balancing your income and expenses. Budgeting is key to this way of life. Here are a few bad habits you may need to be aware of to live below your means:
- Don’t be a people pleaser – This involves spending money to please others, even when hurting your bottom line. Learn to say no to making purchases just to make others happy.
- Impulsive spending – Don’t make unplanned purchases unless it is absolutely necessary. Formulate a monthly budget and stick with it.
- Spending money that isn’t yours – Using loans and credit cards to make purchases can get you deep into the red if you are not responsible enough. This money isn’t yours, so you will have to pay it back sooner or later. Do not go overboard if you don’t want to be buried in debt.
Have an emergency fund
Emergencies are unpredictable. Take the Covid-19 pandemic for example. No one saw it coming and it resulted in a massive global economic downturn. Without an emergency fund to act as a buffer for you, you might have to make financial decisions that can hurt your future financial prospects or retirement. You don’t have to store away most of your earnings into the fund. At the very least, save at least six months worth of living expenses to help carry you through an unexpected crisis.
Plan for retirement
We don’t tend to think about retirement until we are a few years off of it. However, retirement planning is a significant part of financial planning. If you want to spend your golden years not having to think about money, it is essential that you get your retirement plans underway as soon as possible. A good first step would be to set your retirement date.
Setting a retirement date is not as simple as saying “X age is when I will retire”. You will first have to think about the kind of lifestyle you want to live after retirement. This will determine how much you need to earn and save leading up to and during retirement. For example, someone who plans to travel the world and while ticking everything off their bucket list is going to have a more expensive retirement than someone who simply wants to spend their days in peace, watching TV and tending to their garden at home.
How early you plan to retire will also significantly impact how much you will need to earn and save. Those who wish to retire earlier may have to be more aggressive with their investments in order to meet their financial goals.
Get adequate insurance
Some might see insurance as a waste of money. But as we mentioned earlier, emergencies can and do happen. Yes, you might go years without having to call up your insurance company, but you will likely regret not having the right insurance when something does go wrong.
Remember, the older you get, the more possible health complications you may face; and certain treatments can get prohibitively expensive. The same applies to your home. Buildings need to be maintained, and the older your home, the more likely something is going to break. Getting adequate insurance can give you peace of mind knowing that you have a backup in times of emergency.
It is one thing to set up financial goals and achievements. It is another thing entirely to follow-up and stick to the plan. Once you have managed to lay out a workable financial roadmap, you will need to instill the discipline in yourself to follow through. The year is still young, and the further along we go, the more curveballs it is going to throw at you. Take things one step at a time, and you should be able to pull through without too much issue.
