A new year is akin to a new commitment. It is the perfect time to let go of your old habits and start anew. While a lot of people pay attention to generic resolutions like going to the gym, eating healthy, reading more books, etc., for the New Year, financial resolutions do not feature on the list. However, let’s remember that a New Year is the right time to promise that you will do better in all areas of life, including your finances.
To help you get started with your financial plan for the next year, here are the top seven financial resolutions that will guarantee a healthy financial life in 2020:
1. Savings is a MUST
The future is unpredictable. Saving for a rainy day can help you become financially more secure. It also helps to create an emergency fund that you can dip into in case the need arises. As a rule of thumb, you should aim to save at least 20% of your monthly salary by investing in a variety of financial products, so your money does not sit idle.
2. Choose the right investment avenue
The market is flooded with investment options, and it is very easy to be lured in. But always remember that there is never a one-size-fits-all approach when it comes to finances and investment. Spend time to assess the investment options available and choose one that is suited to your needs and investment goals. View the market from the perspective of your long-term and short-term financial goals to check if the investment options are working for you. It is critical to assess the returns and risks associated with each option prior to making any commitment.
3. Don’t fall in the credit card trap
Getting a credit card has become extremely easy. Higher spending limits and pre-approved credit cards result in reckless spending habits. People who have bad spending habits may end up in severe financial troubles and go completely overboard with spending. It also results in credit card debt that carries a higher rate of interest. The debt can also affect your credit profile adversely if not paid on time. If you want to be financially disciplined, avoid using credit cards as much as possible.
4. Keep track of your investments
Tracking is the performance of your finances is as important as investing in the right instruments. If you invest in across a class of assets, draw up a list of the various investments made. Use the inventory to review your investments periodically. This exercise helps you to identify signs of distress in case of poor investments and also help you to chalk out a plan to cope with sudden investment losses. The tracking process may sound daunting, but there is no reason to worry – there are several mobile-app available that can simplify the process for you.
5. Pay off your debts
Going completely debt-free may be easier said than done, but it is essential for staying financially healthy. Review your current financial situation and identify all the bad debts that you have accrued. This includes credit card debt and any other debt that has a high rate of interest. The priority should be to pay off these debts at the earliest. Paying off these debts will also bring you peace of mind and help you refocus on the investment decisions with a clear mind.
6. Promise yourself a no-spend zone
Adding a freeze on your spending schedule is a great way to put an end to impulsive spending. Earmark a few days or a weekend every month where you eliminate any non-essential spending. This means no money should leave your hands or get debited from the bank account. Doing this can consistently throughout the year will help you save more and re-assess your financial needs.
7. Become financially literate
One of the leading reasons for poor investment decisions is the lack of financial awareness among people. Financial literacy is critical as it helps you to make financially responsible decisions and manage pitfalls. As the economic landscape is changing at a breakneck pace, it is vital to keep yourself abreast of the developments. Take the initiative to expand your financial knowledge and learn the basics of money management to make it a part of your lifestyle.
Finances perform best when you stay committed. It is easy to give up on your New Year`s resolutions, but keep reminding yourself why financial discipline is essential. Create a vision board of your financial goals and resolutions or get an accountability partner who can motivate you to stick to your commitments. If you still feel excessively overwhelmed, remember that taking it one step at a time is the key to lasting financial wellness.