As we are already closing on 2017, soon will come the New Year and its good resolutions. How about getting your financial life in order? The idea here is to help you save more money, so you can then spend it on things that really matter to you.
First, we need to start with your monthly budget. How much do you make and how much do you spend exactly? Sometimes, you feel that you are doing ok, but when you look at it carefully, you are actually spending more than you earn. Thus depleting your savings or getting into debt, one month at a time. How do you make sure you stay within budget and reach your financial goals? You start by listing your earnings and your expenses.
Earnings include everything from your day job to interest from the bank, dividends from stocks and shares, rent you get from tenants or roommates, and so on.
Your expenses are your fixed monthly bills, like rent, utilities, phone bill, etc. your variables that can be pretty much expected, such as grocery shopping or gas money, and irregular expenses like a visit to the doctor’s or a new tire for your car. While you can’t anticipate all of these, you should have a rough idea of how much you spend if you look at two or three months of bank statements. Once you have done that, it should be easy to identify if there are areas in your budget where you can spend less. If not, well, you’ll need to find ways to make more money!
The next thing to focus on when you are trying to better your financial life is lowering your debt, and your debt payments. If you have high interest credit cards, it’s time to look for a 0% balance transfer card, and refinancing your mortgage can also save you thousands over the life of your loan. Debt consolidation can also be a good way to reduce your debt payment and interest rate.
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Start by trying to pay the debt that carries the higher interest rate. Once you are done with that, keep going with the second highest interest, until you wipe off all your debt. It gets better as you get rid of one balance, since you can use the money you used to pay off that balance to pay the next credit card or loan.
And once you are done with all that, you can use that extra money to build up your savings and avoid having to charge your credit car the next time your car breaks down or your roof starts leaking.
Once you are back to that point, you can congratulate yourself, and start making plans for the future. What are your financial goals for the next year? Five years? Twenty years? Some priorities can include going on a nice holiday next summer, becoming a one salary household once you have a kid, putting a down payment on a house or retiring early. Usually, financial goals are really personal. That is perfectly fine. The common point is that they all cost money. And you want to save for all your big life events, so you can fully enjoy time with your loved ones instead of worrying about keeping your budget afloat.
So while new year resolutions are great, they are mostly important to get into good habits, that can last a lifetime.