As the new year begins, it is a good idea to try and look for ways to improve your finances this year. Needless to say, the health crisis made the past year a very tough one. Businesses struggled to keep their doors open with consumers staying at home. This led to so many people losing their jobs because customers were just not showing up.
With jobs lost, finances suddenly became tight for a lot of people. If you were affected, you suddenly had to rely on your emergency fund to help make ends meet. It is nerve-racking to think about stretching your savings to cover your family’s most basic needs. The stressful part was that you do not know when it will end.
But it is a new year and it is a great chance to turn over a new leaf. Vaccine for the virus has already been developed and being used in the US and several other countries around the world. This is a good indicator that things are looking up. This is the perfect time to identify opportunities to help you improve your finances this year.
It sounds easy but coming off from the past year, this can be a tough task. You could be carrying over huge debt amounts from the past year. Bloomberg shares that household debt was at $14.35 trillion in the second quarter of 2020. It is not surprising because a lot of people had to rely on credit to make ends meet. If you are serious about getting back on the right track, there are a few things you need to learn to do this year. Here are some of them.
Learn how to budget
If you want to improve your finances this year, you will need a comprehensive household budget. This is one of the most underrated financial tools you will need to succeed in reaching whatever financial goals you have. It is important to take note that your budget needs to be as comprehensive as possible. This will help you make better money decisions.
Learning how to budget takes time and when you are just starting out, your goal is simplicity. You do not need a complicated budget when you are just starting out. List down all your income on one side and do the same for all your expenses. You should have a clear idea of where you stand. The goal is to be able to cover all your payments and have enough to set aside for your savings.
If you are barely left with anything or your total expenses are bigger than your income, you need to start making some drastic changes. You need to either lower down your expenses or find a way to earn more every month. You can also do both. The bottomline is to make sure you have enough funds so you can meet all your financial obligations and save for the future.
Learn how to resist temptation
It will help to improve your finances this year if you are able to manage your financial temptations better. You need to learn how to be in control and overcome your spending temptations. For this to happen, you need to identify your triggers first. This makes it a lot easier to figure out how you can address the issue.
Are you easily tempted when you come across online sale campaigns especially if it comes from your favorite shop? You easily add to cart and whip out your credit card to pay for the items. It’s also possible that you just see an item you like on one of the ads as you are working from home. You check it out and sooner or later, you are already waiting for a delivery.
One of the best ways to resist temptation is to understand what the cause is. It could be suppressed feelings of wanting to belong to a certain group. That’s why you buy more than what you need to keep up. It will also help if you can focus on something else much more productive. It can be exercising or learning a new skill. It helps take your mind off what you are tempted to do and be productive in the process.
Learn how to invest the right way
One of the best ways to help improve your finances this year is to take advantage of investments. But remember that they are not all equal. Investing your money can help you meet your financial needs in the future but only if you do it right. Mindlessly investing your money hoping it earns and gives you a decent return in the future is not the way to go.
This is not to say that investments are predictable. In fact, it’s far from it. No one can ever be precise on the returns. But what you can do is make well-researched investment decisions and manage your risk as you go along. You need to be able to make changes and pivot as you go along. Risk management also means considering your age and the need to secure your earnings by tapering down on a risky portfolio. Investments must be done with a strategy in mind so you do not end up losing everything you worked hard for in the end.
Learn to strategize towards your goal
Improving your finances also means you should have a clear strategy reaching for your goals. You cannot just go out and wing it every single time. It’s possible you will get some wins but you will have more misses than hits. You need a clear strategy this year. After you identify your goals, what do you do next to get to them?
This is the part where you put together the steps you need to take to get to where you want to be. If you want to pay off your credit card debt, you get the total and divide it by how many months you want to pay it back. During those months, you will be more conscious of your spending which will help you improve your finances as well. The steps you take are crucial in making you stick to being a better money manager.
Learn how passive income works
Improving your finances is not as easy as flicking a switch and then everything suddenly goes your way. You need to put in a lot of work to make that happen. But it does not mean that you do not have tools or strategies you can use to make this happen. One of these is learning what passive income is and using it to your advantage.
Passive income is where your money grows with less effort as compared to your day job. It could be a rental property, going into P2P lending, REITs, or even investing in dividend-yielding stocks. There are a few of them to consider and it depends on the strategy you want and the risk you are most comfortable at. Investopedia shares that your risk tolerance is an important part of your investments. It is important for you to know this before you start putting hard-earned money into investments.
Improve your finances this year by learning how to stay healthy
This is perhaps one of the most important concepts to come out of the health crisis. People were getting sick left and right because of a novel virus. It affected young and old, sick, and even healthy Americans. But in any type of sickness, the healthier you are, the higher your chances of either staying away from the virus or recovering faster than others.
If you are healthy, it also gives you the chance to be more productive at work. It can also provide you more energy you can spend with your family or in looking for a side hustle. The extra funds you get from working a side gig can help you strengthen your finances and push you a lot closer towards your goals for the year.
It is essential to try and improve your finances this year as you try and pivot from the challenges of the past year. Keep in mind that though it will not be a walk in the park. But proper planning can help you accomplish and be successful in strengthening and improving your finances.