The new year is coming up in a few weeks and you need to be serious about personal finance rules to bounce back from a challenging year. The health crisis that gripped the world has challenged the resiliency of people all over the world. In the US, a lot of people were put on furlough or worse, let go from work.
Needless to say that if you were affected financially, this is easily one of the toughest years you had to endure. But as the economy starts to open up again and businesses are slowly bouncing back, you could find your finances improving as well. You might be back in the office or you have a side hustle that is providing you the income you need for your family.
As the new year is about to start, you need to be a lot smarter when managing your finances. There are a few personal finance rules you can look into to help you get back on track. This is helpful especially if you are still struggling with your finances up to now. Not everyone is back in the office or have a side hustle to rely on.
Regardless of your current financial situation, this coming year is a chance to bounce back and get back on track. There is a good chance that you lost focus and are way off-course on most of your financial and even life goals. Here are a few money rules you can go back to and rely on to just restart and get back on track.
Build up your reserve fund
One of the biggest lessons people learned in the past few months was the importance of having an emergency fund. People who had some form of savings coming into months of staying at home were better off compared to those who did not have any savings. This is especially true for those people who were let go from work or forced to log in fewer hours than before.
If your job was affected, having an emergency fund could have helped you stay on top of all your financial obligations. You are not only able to provide for your family’s basic needs, but you are also staying away from debt. You have enough money to make at the very least, the minimum payment on your loans.
This is the reason why building up your reserve fund should be one of the personal finance rules on top of priorities for the coming year. You never know when you will need it. The pandemic came without much warning. This holds true for most of the emergencies in your life. Getting laid off, having health issues, or even your car breaking down can put your finances in a tight spot when you did not set aside some emergency money.
Slash your debt down is one of the top personal finance rules for the year
As the year comes to a close, you should have a clear idea of where your finances are exactly especially your debt situation. Knowing your financial obligation is the first part of trying to manage it better for the coming year. The goal is to try and cut it down as much as you can without sacrificing other financial goals.
Your list can help you identify the best debt repayment strategy you can use to focus on your payments. Debt consolidation could be on top of your list for the year because of its simplicity and benefits. Being able to put most, if not all your debt under one account helps you monitor your payments better. This lessens the chances of overlooking a payment due date.
Debt consolidation can also help you lower your monthly payment especially if your credit score is higher now than before. You can also choose to pay over a longer period of time. This stretched out method can lower your monthly payment. But take note that you would be paying a lot more when you finally pay off your debt.
Explore passive income
Personal finance rules for the coming year should include a strategy to find and make the most of passive income. When you hear this, the first thing that can come to mind is putting down money on investments that grow over time. All thanks to compounding interest that works for you and not against you.
You can also explore setting up an online store and automate most of the process so you can focus on certain aspects you enjoy. It can be marketing, sales, or even product development. If you have friends who are trying to set up a business, why not invest in it. Just make sure that you put everything in writing and conduct due diligence as well.
One thing you have to remember when going into passive income is that all your options carry a certain amount of risk. Risk is manageable but you need to stay on top of it every time. You need to understand your risk tolerance as well before everything else. Forbes shares that risk tolerance is your willingness to absorb losses as you pursue greater gains. Also, it is important to note that as you get older, you need to take on lower risk with your investments. This will help you preserve capital and your earnings.
Automate your finances
Technology has been playing a big part in the advancement of the financial industry and you can use this to your advantage. One thing you can look into is using technology to help you gain better control of your financial activities. This is most helpful especially when it comes to keeping you on top of your payment schedules.
You can work with your bank or lenders to set-up an auto-debit system for your payments. As the name suggests, this will automatically send out the payments every month to your enrolled accounts. The only thing you have to do is monitor and make sure that you have funds in your checking account to cover all your payment obligations.
Doing this will help you save time in going over your accounts one at a time every single month. It also lowers the chances of human error where you might overlook a payment due date. This will save you from paying interest, fees, and other penalties. Auto-debit will also help lower down interest rates for some student loan lenders. That will give you the chance to pay a lower amount each month and save more.
Learn a new skill
This coming new year should be your bounce-back year. But more than just simply getting back on track, you need to look also at self-development. Investments are not only limited to stocks or business ventures. You need to also look at yourself and identify areas you can develop like a skill you need at work. Even Warren Buffet says that investing in yourself supersedes all other investments.
This can also be a skill you can further develop later on as an income-positive hobby. It can help you identify a side hustle you can explore this coming year. Working on something you already love doing in the first place and earning from it can be a great way to earn extra money. This means you get to save more each month to strengthen your savings for the future.
Personal finance rules can help you get back on track for this coming new year. Of course, you need to be disciplined enough to follow through and make sure to stick to the rules you have set. Only then will you see the results and get back to reaching your goals.