WATCH: Financial Adviser: 5 Important Money Resolutions for 2021 and How to Fulfill Them
The year 2020 has been the most difficult year financially for many of us. A lot of people lost their jobs due to business slow down and closures. Many have exhausted their savings and used up their credit cards during the trying times from the lockdown.
If there is one thing we learned from last year, it is to rebuild our finances and create a solid foundation that can endure any crisis in the future.
But no matter how much we want to put our financial lives in order, if we don’t have the right money mindset, we will always go back to our bad habits.
If you want to succeed and achieve your financial goals in life, you need to have the right attitude and perspective in wealth building.
Start the year right by prioritizing your personal spending. How do you spend wisely? How much should you save and how do you invest it to grow? When you have the discipline to spend, that is when you will also develop your good money habits.
It may take some time for you to really get used to it but once you have acquired it, you will have better control of your money.
Are you ready to be financially fit? Here are 5 suggested money resolutions you can follow this New Year:
1| Plan your short-term and long-term financial goals
Setting your financial goal is the first step to getting yourself financially organized.
How much money do you want to earn in 2021? How do you intend to achieve it? Goals must be measurable and achievable. There is nothing wrong with thinking big but if you set your goal too high, you may get easily discouraged.
Make your goal attainable based on your financial capability. If your financial situation changes during the year, for example, your monthly income increases or you make a financial windfall, you can always adjust your goals higher.
Short-term financial goals that can be achieved within the year can be about paying off your credit card debts, saving an amount for investment or annual family travel budget this summer.
Long-term financial goals, on the other hand, include savings you need to attain to start a business, pay for your children’s education plan or for your own retirement.
2| Plan how to earn more money and boost your cash flows
When you have identified your financial goals, you must find ways to achieve it. How much do you need to save regularly from your monthly income?
Set aside a certain percentage, let’s say 10 percent, and put this in a separate account. Transfer this automatically every time you receive your income before you spend the rest.
Sometimes your current income may not be enough to meet your savings goal. You have to look for other sources of income to boost your cash flows.
One is to look for part-time work on weekends. If you have good business ideas, you can also try entrepreneurship that may not need so much capital.
3| Plan your spending priorities and keep track of your expenses
Another way to boost your cash flows is to look for additional savings from your current monthly spending.
Try to identify which among your regular expenses are discretionary. For example, if you buy cappuccino every morning from your favorite coffee shop, maybe you can cut this down to once a week so you can save some money.
To better monitor your expenses, create a monthly budget. Identify your monthly expense items and put a budget on each. You can make a simple monthly projection for the next 12 months on how much money you will most likely spend for the whole year.
Once the New Year kicks in, keep track of all your monthly expenses and compare it with your budget. Evaluate the variances and determine the causes for such differences.
Having a budget will help you focus on your spending priorities. You may not be able to comply with your budget completely but it will at least help you keep your spending in check.
4| Plan your investing strategies to grow your savings
The key to building wealth is not in saving and keeping your money in the bank. It is by growing your money through investing.
When you invest, you can grow your savings faster by earning passive income, which you can reinvest to grow your investment or by earning capital appreciation over the long term.
Your investment options can range from fixed income instruments to real estate. For example, you can invest a portion of your savings in bonds that pay you fixed interest rate over a number of years.
You can also buy some stocks, preferably blue chip and some dividend-paying stocks. You can also invest in real estate condominium for rental income.
In investing, there is always a risk that you will lose money. So make sure that when you create your strategies, you know how to diversify your investments to manage your risks.
5| Plan to develop your personal growth to boost your earning capacity
Many people would rather sit down and wait for opportunities to come to them than go out and look for it. If you want to grow financially, you must find ways to increase your opportunities to make money.
Your personal growth is your personal responsibility. Create a personal development pathway for the year. For example, you can enroll in seminars on marketing practices during the first quarter of the year.
Then in the following quarters, you can schedule to attend courses on finance or general management.
When you attend seminars, you also get to know more people, which allows you to increase your network of contacts. Attending professional development courses helps you increase your earnings potential by becoming more marketable. If you are entrepreneurial, you can also get more ideas and get more opportunities for collaboration.
With regards to your personal finance, perhaps you may need to have a mentor who can help and guide you monitor your money resolutions.
Get someone who is competent to advise you. Someone who is independent and qualified such as a Registered Financial Planner.
Henry Ong, RFP, is president of Business Sense Financial Advisors. Email Henry for business advice [email protected] or follow him on Twitter @henryong888