Towards the end of each year, we all make some kind of New Year’s resolution; some to be completed, some reach halfway and others meant to be broken. Some resolutions help us grow personally, while others intended for us to flourish professionally or financially.
People generally make resolutions for a new year as an additional motivation to start something that they are hesitant to proceed into. More often than not, the possibility of failure rises as a result of our predisposition to make our goals larger and harder to reach than necessary. It is by far a better idea to start off with smaller ambitions with specific and distinct objectives for more promising results. Smaller changes made over time have a greater chance of eventually leading to bigger habit changes.
Making a list of new year resolutions is a no-brainer compared to what comes next; “sticking to it” is the real challenge. Given how dire the year 2020 has been it is a good time for us to do our best in making plans and seeing them through. While the pandemic has been catastrophic for many people’s well-being which raised health expenditures, the health scare has also impacted our lifestyle due to the setback in income generation and finances.
Alongside several health and fitness goals now is the time to focus our attention on our financial resolutions to bolster our post-pandemic years. Every month, there is a coin toss between our savings and expenditure, but now we need to find a balance between the two, meanwhile finding new ways to flourish financially and safeguarding our future. Here are our five Financial New Year’s Resolutions you too can start exploring for yourself right now:
Making financial decisions, segregating your needs and wants from your regular salary can be difficult. Cash in-flow and out-flow is a daily part of our lives and how the economy works, but it depends on the format of your payout and how you are handling your funds to know how your finances work.
So here, you can make a structured plan of 50/30/20 from your monthly income or allowance; 50 being your regular basic needs, 30 being your non-essentials or simply your wants you yearn to fulfill and 20 being the portion you save for the future. Creating a budget starts with recognizing your current level of expenditure and savings. From there, determine how much money is normally required for you to cover your fixed monthly expenses and how it can be minimized to fit your structure. Then, you may decide how much you’d like to allocate for other portions. One thing you could do to better track your spending is making a note of your expenses for 30 days and see where you are and how much is left. This will give you a clear picture of your spending pattern in a month’s time and act as a guide to plan for the next.
Over the course of the pandemic, the use of digital payment platforms have taken an acceleration. These platforms are a great way to not only make safe, virus-free payments, but also to track your savings and expenditure.
The country’s economic growth has slowed down, people are losing their jobs, business sales are decreasing and the economic situation may remain this way for the next few years to come. In such a scenario, it’s crucial to have an emergency fund prepared. In today’s more economically-challenged environment, you may want to plan at least three-to-six months of expenses that will be covered by your emergency fund. If at the moment you cannot invest a large enough sum into this, that is alright, every little bit counts; just start by adding a consistent or higher amount to it every month making it a priority for the uncertain future.
Your emergency fund need not remain ideal. You can set-up a fixed deposit and gain interest on it; you may break it at any given time if absolutely necessary.
Cutting off your avoidable expenses is like dieting, you spend on things that are mandatory and required for you while lowering expenditure on items that aren’t vital. However, quitting these alluring extra expenses cold turkey could be impossible and even cause you to become more vulnerable and susceptible to stimuli that may easily nudge you into a spending spree. While working on your budget you can rank your essential expenses as well as non-essential expenses by priority, then you may choose to segregate a certain amount so that you can spend that amount freely; much like a cheat day.
Saving up by reducing non-essential spending can be tricky but manageable. Say, if you are going to work you can carpool with friends or colleagues, use public vehicle or app-based transportation services. You can use digital payment platforms like mobile wallets or online payment portals for your regular utility bill payments, financial payments, send and receive money, etc. to save your cost and time of actually visiting the office or counter. You can also control your impulsive shopping habits, eat out less or even travel domestic and explore your own country instead of vacationing abroad. Start small and slow; manage your budget, separate a portion for discretionary expenses, spend only that without guilt and save as planned.
There is a world of knowledge, skills, and ideas you can simply learn on the internet if you wanted to. Aside from your regular work, try learning and building up some other skills to boost up your creativity and even monetizing it for some financial benefits. You may want to develop a new hobby, interest, or ability; it may even be relevant to your field of education or maybe you already have experience in it; whether it’s consultation, freelancing, translation, writing/blogging, graphic design, teaching, web programming, you name it, you can delve deep into it, learn more and enhance yourself. Then moving forward in life, with that new or enhanced skill you may apply it to start a new project or what they call a “side hustle” as an additional source of income.
You can also gain an advantage in your current line of work; perhaps a raise or a promotion may be up for grabs. Learning new knowledge and skill is never a waste, it ultimately depends on how you manage those skills, fit them into opportunities and mold them into gains.
Debt is neither good nor bad if you can ensure it won’t dominate your earnings at any given time. You may have a home loan, student loan, vehicle loan, mortgage, or credit card balances; you must consider more cost-effective ways to manage any kind of debt. You can find ways to renew the terms of your loans at a lower interest rate. Another thing you can do is, focus on paying off the more expensive debt before others. Try to avoid borrowing funds to buy depreciating assets. Your debts tend to add up, if you carry this balance it will effectively hamper your savings. Gaining more control over your debt is an important way to improve your financial position over the following years.
Making an effective Financial New Years’ Resolution should be your first step in ensuring financial security and the freedom to spend money in your life over the long haul. Despite the distressing year we have had, with these resolutions, let’s move into 2021 with an open and positive mindset. We have all experienced a new way of life over the period of this year. We must now strive to live this new way of life in the best way possible. It is time for yet another annual ‘fresh start’.
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