New year, new goals. It’s always good to welcome another chapter in life as it also indicates an opportunity to right the wrongs, fulfil the hopes and face new beginnings. Just because the previous year did not work the way you wanted does not mean you can’t make a difference this year.
Sure, most of us would intend to start a new decade with such a long list of resolutions but don’t forget to consider adding financial to-dos on your list. As for financial goals, perhaps you have these specific goals in mind like making your very first huge purchase: a house, a new car, etc., paying off credit card loans, travelling new places or maybe your goals are much broader than that. Well, that’s great. But don’t go crazy and overwhelm yourself in the middle.
While setting huge financial resolutions is wise, make sure to start with small, realistic goals that will help you work toward your larger objectives this year. You know what financial gurus would always say: it’s okay to build a support system that will make it easier for you to establish and achieve your goals.
So, let’s start with your support system ‒ the budget.
Strictly stick to my budget.
Let’s be honest here: making a budget and sticking to it is probably one of the toughest things to accomplish in a year. But if you want to start making a difference this year, you have to remember that smart and strict budgeting is the key to being financially successful. Many people may earn a lot but struggle financially because they don’t know how to manage their money well. Starting a budget may be very intimidating but don’t let it stop you from achieving your goals this year. If you are having a hard time sticking to your budget, you may consider envelope budgeting system which stops you to spend once you have reached your budget limit for the month.
How it works:
- First, determine your discretionary income or the amount of money left after paying your bills.
- Allocate your discretionary income into different budget categories including household items, groceries, gas, clothing, and allowance.
- Provide an envelope for each category where you can place the estimated cash.
- Once you have met your budget limit for that certain category, there will be no more cash to spend until the next payout.
- Save any amount of cash that’s left from your allocation. You should be saving at least 10% or more of your income per month.
Improve my credit score.
The best way to improve your credit score is to get yourself out of debt. Start learning to pay your credit card in full to avoid recurring interest charges. Instead of putting your money on interest and late fee charges, use it toward something else such as investments and your other larger goals.
How to improve your credit score:
- Set up a debt payment plan (automatic debit arrangement).
- Reduce your spending to cover loans.
- Sell items or rent out your space to pay off debt.
- Get another part-time job to save extra money for your debt.
Say no to supplementary credit cards.
I hope one of your goals this year is to stop opening a few more credit cards to use on shopping and other related expenditures. While there is no exact answer to how many credit cards an average person should have, it all depends on how responsible you are when it comes to management and paying off all your credit card balances and cash advance loans. But it is important to note that every time you open a new credit card, whether you get approved or declined, the issuer will pull your credit report and that way can affect your score negatively.
Putting your money on smart investments is a great way to grow your finances at a faster rate. A lot of people are investing on their own but if making investments is kind of a new thing for you, you can always consult a financial planner to help you out and give you suggestions regarding your life and financial goals. Many financial planners are encouraging everyone to invest in retirement including 401(k) or an IRA. But a good financial planner will always help you find the investment that will best match your current status and comfort level when it comes to risks.
Speaking of investments, today is also the best time to invest in your future, especially when you are in your early 20s. Getting a life insurance policy at a young age can give you an advantage of paying lower premiums and accumulating a larger amount of payout in the long run. While life insurance is not something that most millennials think about, a very small number of millennials that are insured is making them the generation that is least prepared for unexpected life events.