Resolution: noun A firm decision to do or not to do something
As we go into a new year, there are so many areas in which you can resolve to do better … health, self-care, organization. In fact, when I searched for the most popular resolutions, almost all sites agree that people’s resolutions have to do with either health or their money.
With my newsletter this month, I wanted to see if I could help guide you in at least one of these areas … your Finances
5 Financial Resolutions to make for 2021
1. Find “Your” budget
I’ve been talking a lot about this lately in my recent webinars and as a part of this month’s Financial 15, but there is so much importance in finding what works best for you. Whether you are thinking of tracking your every penny or just doing a general overview of your monthly needs, your budget needs to be personal for it to stick.
Below are 5 options for starting a budget. The best way to begin is to pick the one that feels like it could work best and live in it. In a few months if it isn’t working then switch it up. Finding your budget is an ongoing process.
• Cash only –use only cash to better visualize how much you are spending
• Envelope System – put money into separate envelopes to help apportion your income properly
a. Physical: Take cash out of the bank and put it into an envelope designated for each expense need (i.e., Groceries, rent / mortgage, car, etc.)
b. Electronic: Set up bank accounts for different purposes (home / apartment expenses, travel and recreation, savings, etc.)
• Track-every-penny – meticulously track every cent of your finances to strictly understand your cash flow and spending habits
• Zero-sum – allocate every penny of your budget, even towards savings and investments, until there is nothing left of the income from that month
• Percentage – decide which proportions of income are set aside for different types of expenses
For assistance in getting your budget going, please contact me to set up a meeting!
2. Form an Emergency Fund
Emergency Funds are used for just that – an Emergency! If we’ve learned nothing else from the pandemic, it’s that we never know when an emergency is going to happen, and it’s so important to be prepared.
If you’re not sure how to start an emergency fund, start small. Put a few dollars a month into a separate account and practice not touching it. Then continue to fund the account over time until you have enough saved to protect you in case of an emergency. For most people, this should be approximately 3-6 months of expenses, however, can extend longer if it would be difficult for you to replace your existing income easily.
If you want a guideline on putting together a list of expenses, take a look at the cash flow download from my Net Cash Flow blog. Although this isn’t an all-inclusive list, it is a great place to start.
3. Pay Down Debt
Even if you have a budget and have started an emergency fund, debt can still be weighing you down. Start by writing it all down and getting the information in front of you – the good, the bad, and the ugly. Write down the amount outstanding, interest rates, and monthly payments.
Once this is done, create a schedule for yourself. Always pay the minimums on all debts, and then pay more than minimum on just one debt. Focus on that until it is gone and then move to the next debt.
If you don’t have debt right now but are considering borrowing for something this year, do this same review. Look at what you can afford, how long it will take to pay off the debt, and how much interest it will cost you.
Debt payoff strategies you can use:
• Power Pay – Pay off the highest interest rate debt first, since it accrues the fastest.
• Snowball Debt – Pay off loans in smallest balance to largest balance order, gaining momentum as you move on
• In each strategy, ensure you are using Power Payments – Once one debt is paid off, roll the monthly amount which was going to that debt into the next debt you are planning to pay off.
Schedule a meeting for assistance in compiling information on your debt and finding the payoff strategy which works best for you.
4. Take control of your plan
This is the most important step. A plan is only as good as the actions you take after making one. Start by:
– Writing it down – You are, on average, 42% more likely to succeed in doing so
– Acting on it – Do the things you want to do
– Reviewing month after month – Go back to your initial plan and see how you are doing
– Rewarding yourself – When you accomplish a part of your plan, reward yourself with something simple as an incentive to stay on track
– Lastly, don’t forget to grow within your plan – As you do better, expand your financial reach. Don’t let your plan get stale
If you are having trouble staying on track, get an accountability partner, or an advisor, such as myself, to help!
5. Go Someplace You’ve Never Been
While doing my research for this month’s newsletter, I found this resolution. Now, it was originally written to mean a physical place, but I think that it could mean a hypothetical place as well.
Finances can be hard. They can be draining and even scary sometimes. If you’ve never been good at them, then even getting through this article could have been a great achievement for you! If you feel like you’re great at your finances, maybe there is still more that you can learn about retirement or investing. There is always someplace we can go that we’ve never been before. Take this year to learn what that place is, and go!
Wishing you a very Happy and Healthy start to your new year. If you want to share some of your resolutions with me, please schedule a meeting with me! I’d love to support you in all of your endeavors this year.