One of the biggest financial goals you might have for the new year is to strengthen finances in 2020. This might seem like an impossible task but only if you do not define what it is you really want to achieve. It is good to have general goals that you aim for but if you do not roll up your sleeves and clearly define what you want to improve and strengthen, you will be stretching yourself out too thin trying to accomplish a lot of different things at the same time.
You might think that this is one of those financial resolutions which a lot of people are jumping on at the start of the year. Most people even have a big list where financial changes they want to happen form only a small part of it. The usual items at the top of their list are going on a diet and trying to lose weight for the year.
However, trying to strengthen finances in 2020 should be on top of that list or even have a list of its own. This has a lot of components that it cannot be just one entry in a list of all the things you want to change in the coming year. Your finances is a crucial part of your life and it is a good idea to try and keep improving on it as time goes by. If you have the chance to do it at the start of the year, take the opportunity to do so.
Now that you are looking for ways to strengthen and improve your finances for the coming year, you might be overwhelmed with all the areas you need to look into. This can make you double back on your plan and doubt yourself even before you have begun fixing your finances. Here are a few things you can start with to help you move forward in the right direction.
Rework your household budget
You need to understand that your household budget plays a crucial part in your financial journey. It is an important tool that will help guide you through your finances and provide you accurate data to make informed money decisions. That being said, you need to make sure that your budget is still relevant with all the changes in your finances.
Any changes in income and expenses need to be reflected immediately in your budget. This will help you see funds a lot clearer. This is important especially when times get tough and emergencies start to show up. Your budget becomes all the more important and understanding it is crucial. This is because NYPost shares that a lot of Americans lack even basic knowledge when it comes to financial terms.
When you understand your budget, you can make the necessary adjustments in it. You can only do this if you have accurate information on hand at the time you need it. This is the reason why you constantly need to work on your budget all year round, especially at the top of the year. Not only should it reflect changes in your income and expense but take into account goals you might have as well.
Put more in your emergency fund
One way to strengthen finances in 2020 is to put more in your emergency fund. This is important since CNBC shares that one-third of Americans will go into a difficult money situation with an unexpected $400 expense. It is because of this that you need to put your emergency fund high up in your priority list for the year.
However, be careful in putting all the focus into this fund because you stand to lose focus with your other financial obligations. You might start to miss credit card payments because you want to put more in your emergency fund. Your mortgage payment might be put off since you are all too focused on your emergency fund.
The idea with your emergency fund is to save at a steady pace. Identify the amount you need to save and spread the amount over a period of time. Once you do that, be consistent and even look at automating the process so you do not forget saving for it. You might be surprised by what you get to save when you do it right.
Consider adding a rainy day fund
One thing that can help you strengthen finances in 2020 is to look at adding a rainy day fund. It would have a lot of comparison with your emergency fund but it helps you protect it as well. The rainy day fund is smaller in amount compared with your emergency fund and it is meant to cover the smaller emergencies you might have.
A light replacement at home or getting the oven fixed can be covered by the rainy day fund. This can be more accessible like an envelope at home but the more important aspect of this is that it prevents you from pinching into your emergency fund. The small emergencies could take its toll on your emergency fund and you might not realize that you have depleted this fund with all the small needs. With a rainy day fund, you can keep your emergency fund intact to help you weather through big challenges in your finances.
Increasing your income through your hobby
This helps you create a more sustainable way of bringing in extra money every month because you are doing something you already like in the first place. If you want to strengthen finances in 2020, this can be a great way to help you bring in more money to your budget for the year. The first thing you need to do is identify the hobby you can use to earn extra income.
If you are a creative person, look for people and companies willing to pay for your services such as painting, photography, or even graphic design. You can also sell baked goods if you love to make cookies or brownies at home. It is also possible to take up online writing jobs you can do at night to help you bring in more income every month. The bottom line is to start from activities you already love doing so it does not feel like a job for you.
Cutting down on your expenses through frugal living can help strengthen finances in 2020
If you decide to look for ways to increase your income, it also helps if you try and lower down your expenses as well. These two go hand in hand and helps free up a lot more funds in your finances. The more funds you have, the stronger your finances can be if you use them wisely. Lowering down your expenses is a great way to help you do just that.
One route you can take is using a creative approach in a bid to save money. Some people refer to it as frugal living where you try and live below your means. The idea is to look for creative ways to save money such as food. If you have been so used to ordering take out food, it might be time to start preparing and cooking your own meals at home.
Going to work can be in the form of a bike rather than a car. You not only save money but get some exercise as well. You can also try and simply stream the movies at home rather than driving, parking, buying food, and buying movie tickets for the whole family. A frugal lifestyle should not be restrictive but rather a creative outlet for you to save money.
It is tough to try and strengthen finances in 2020 but there are decisions and actions you can take up to help you reach that goal. You need to clearly define it so you can work on the specific areas in your finances throughout the year.