There are a lot of misunderstood financial resolutions you might consider doing at the start of the year. It is no secret that the reason behind this is that you want to be a better version of yourself this coming year. The danger is that you might be overzealous and tend to overdo these resolutions to the point that you negate whatever benefits it brings into your finances.
As the saying goes, too much of anything is bad for you and this includes items in your financial resolution. If you wanted to earn more this coming year, you might take up all the jobs you can fit in your waking hours. Only to fall into sickness and use up whatever amount you did manage to save to pay for your hospital bills
Take a look at other people who promise to be healthier this time around – they go into crazy fad diets the first few days only to fall off the wagon. Those who want to take up a new sport, they go all in buying everything they need only to find out that they really do not like what they’re doing. Now they are stuck with sports equipment they will never use again.
There are a number of misunderstood financial resolutions you have to be aware of. These can only push you further away from your intended goal. Especially as CNBC shares that Americans had a cumulative debt of $3.93 trillion by September 2018 excluding mortgage loans. Choosing the wrong approach to your financial resolutions could put you in a disadvantage financially.
I will use all extra money to pay off debts
One of the most popular financial resolutions every year is choosing to reroute all your extra money towards debt payment. This is a nice gesture but here are some pros and cons so you can understand it better.
Pro: You want to be debt free
It takes a lot of courage to finally want to break free and pay off your debts. The process and road ahead can be challenging as well. You can even look at debt consolidation to help you manage your payments. Putting extra funds into your payments will also fast track the results you are aiming for. You get to pay it off a lot faster saving you from a headache and the stress of debt payment.
Cons: You could miss out on the fun thing in life
This becomes one of the misunderstood financial resolutions when you put every little extra money you have towards it. When that happens, you do not leave any more room for your hobbies, interests or even a night out with your family or friends. Debt payment is important but it should not define your whole existence.
You need to balance the amount that you will put into extra debt payment. It might be too much when you funnel every last penny into debt payment. Make sure you use your income to enjoy life as well. Go out and eat with family and friends or even save up for that trip you have always wanted. Life should be fun and you need to enjoy it.
I will consolidate my debts no matter what
As mentioned previously, debt consolidation can help you manage multiple debt payments. However, you need to understand that it is just a tool and it is not applicable to each and every financial situation.
Pro: It can help you manage your debt payments better
There is no doubt that when used correctly, debt consolidation can help people manage their payments better. This is helpful when you have too many credit card debts with high interest rates. The average American has about 3.1 cards under their name. If you had more and reached the limit on all of them with high rates, consolidating them under a low-interest card can help you save money when paying down your debt.
Cons: It is not for everyone
Debt consolidation is a great program but it is not for every single financial problem. You should not force the issue and use the program for all types of problems. There are other types of programs such as debt settlement to help you with your debt payments. Choosing debt consolidation just because a lot of other people are doing it might not node well for you.
This is one of the most misunderstood financial resolutions because the program is effective for people that need it, everyone thinks it can solve everything. You need to audit your financial situation first and understand where your financial problems start. This will help you answer the question “Is debt consolidation right for me?”
I will follow a financial resolution list
This has been a common practice for a lot of people at the start of the year and it is usually a good indication that people want to be better. Depending on the way you approach it, it can have a direct effect on your finances.
Pro: You put an order in your financial affairs
It is exciting to finally be able to list down all the things you want to change and achieve at the start of the year. It gives you direction on where you are headed for that year. You are able to keep your eye on the target helping you make better decisions especially when it comes to your finances.
Cons: You could get bogged down when you can’t cross out an item
The usual practice is to write down your financial resolution list from top to bottom. This means you always prioritize the things that are most important and create the list with the least important at the very end. There might come a time when you have a hard time moving forward with your list when you can’t get past one item. You are held back trying your best to accomplish that one goal. This is why this is one of the most misunderstood financial resolutions.
If you are help back by one item in your list, it might be a good idea to come back to it and work on other items in your list. This way, you keep on moving forward through your list as the year goes on. You can come back to that item anytime when you are more prepared to tackle it.
I will save more money through cheap purchases
A lot of people wants to save more money this year but there are questionable ways of doing it to the point of blurring the lines between cheap and quality items.
Pro: You understand the need to save on expenses
One good thing that can come out of buying cheap items is that you have developed the habit of trying to save in areas where you can. May it be in food, car needs, or with household items. There are a lot of ways to save money and buying less-expensive items is one of them
Cons: You can end up paying more
This is one of the most misunderstood financial resolutions because you might have a hard time separating being cheap and being frugal. You have to take a frugal approach and see the whole picture. If your car breaks down and you need a radiator and opt for a cheap knock-off, you can get the car running again but will need a repair sooner rather than later. However, if you buy the original and pricier one, you pay more upfront but save over time because you do not have to replace it often.
Find the right balance between paying less and purchasing quality items. It does not mean that you always have to buy the most expensive item because quality does not always equate to an expensive price tag.
There are misunderstood financial resolutions that you might pick up at the start of the year which will just give you more trouble. Be wary of proceeding with a financial resolution because you have to make sure you are on the right path.