I am going to manage my finances efficiently.
Does it sound like a New Year resolution? Most of the people relate New Year resolutions to their finances, and rightly so. As mentioned on Statisticbrain.com, saving more money and spending less is the third most common New Year resolution made by Americans. As many as 34 percent people make money related resolutions every year. If you are planning to save more money to improve your personal finances, you are already on the right track.
A man who both spends and saves money is the happiest man
because he has both enjoyments.
If you are trying to put financial odds in your favour, here are some tips to gain your financial freedom this New Year.
- Prepare a financial Plan: Napoleon Hill said, “Whatever the mind can conceive and believe, it can achieve.” So, start with a plan and write down your current financial status, long-term goals, and short-term financial targets. You need to prepare a budget that accommodates your financial plan. Make sure to add your New Year resolutions and it is important to keep it real.
- Pay down debt: Have you been caught in the debt wave for far too long? New Year is the perfect time to start working on your debt. List down all the debts you own along with the interest rate for all of them. Choose the debt with highest interest and start paying it, although you need to make the minimum payment for other debts to keep your credit ratings from falling.
- Make maximum payment for credit card bills: As an extension of the previous point, credit companies charge highest interest rates and you should try to make maximum payment of your credit card bills. Credit card payments, if not paid on time, can result into high missed fees and excessive interest charges. You should aim to make maximum credit card bill payments and avoid falling into credit card debt trap.
- Rethink about your retirement savings: Never let your retirement savings take a back seat because of your current expenses. You can contribute a fixed amount every month or after every quarter. Start with a retirement amount in your mind and start savings accordingly. The early you start, the more you receive. The power of compound interest is incredible.
- Keep track of your spending: For households living without a budget, it is important to track down your important expenses, even the smallest ones. Use on-line websites or apps to track your financial expenses and try to cut off these expenses with a margin of 5%.
- Financial literacy is important: Financial literacy can lead to financial empowerment. Start educating yourself about finance and best investment strategies for your money. The key to a prosperous life is to understand financial investments. Start with financial news and dig deeper towards investments. If a financial advisor suggests a new investment strategy, you should already be aware of that.
- Divert bonuses and hikes towards savings: Nobody else is going to save money for you until you start doing so. Start by diverting a big part of your bonuses towards savings, and spend a little towards other luxuries. Bonuses are an excellent way to setup an emergency fund for your family.
- Start an emergency fund: If you do not have an emergency fund, it is time to consider it. An emergency fund gives you the financial freedom to handle any difficulties of your life. You can fair well through a rough financial weather. Start with at least 6 months of savings in your emergency fund.
- Rebalance Investment Portfolio: Most of the people rely on their financial advisers for investments; however, it is hardly the best approach. You need to figure out your risk appetite, return expectations, and future expenses before choosing portfolio strategy. Diversification is important and your portfolio should not be dependent on any particular investment. You need to consider the current market trends for your short-term investments. All you need to do is to calculate your portfolio value once every year.
- Consolidate your bank accounts: If you are operating multiple savings account or checking account, it might help to consolidate them. It will save the extra fees that you otherwise need to pay and it will offer additional perks/savings. In the process, close any accounts that you don’t use to save on inactivity charges, avoid identity theft, and account dormant charges.