So, let me guess?
It’s another new year, and you are still stuck with your finances. You made some resolutions last year, but you did not follow through with some of the resolutions (if not all). It could be you wanted to be debt-free, or to save more and spend less, or even more significant than that. However, often for the past years or an even worse – decade, every December, you reflect on the resolutions you made and cannot figure out why you do not seem to achieve them.
Well, you may be making resolutions, but you do not have a plan on how to see to its fruition. Do not fret; you are not alone. Besides, it’s estimated that only 8% of Americans achieve their new year’s resolution according to a report by the University of Scranton’s. So, how do you join the 8% and crack your new year’s Personal Finance Resolution?
Set Realistic Goals
Do you want to buy a yacht? That’s a good dream. Unless you are among the one percent good for you. If you fall under the 99% of the rest of the population, just a reminder, new year’s resolution is short term goals, not long term. Short term in the sense they can be achieved within a year.
Yes, set realistic goals that your current circumstance can achieve like to save “X” amount of money, pay off your credit card debt, save for college, among others. Be specific as possible on what financial goal you want to achieve by the end of the year. You can use the word SMART. (specific, measurable, attainable, realistic, and importantly time-bound.)
Calculate Your Net worth
Personal financial goals are about making a step forward. How can you make a step if you do not reflect on your current standpoint? What better way to do that, but by knowing your financial net worth? Looking closely at all your finances, assets, as well as liability, gives you a clear reflection of your financial muscles.
With such information, you can make a sound resolution of where you want to be by the end of the year. Some sites and tools allow you t calculate your net worth. Also, knowing your net worth will give you an idea of whether you are safe financially or you have more liabilities than assets? That’s how you begin correcting your financial mistakes and have a balancing balance sheet.
Make a Budget
Not planning is planning to fail. Yes, you can’t be spending money anyhow and expect to crack your new year’s finance resolution. It’s hard to achieve your personal financial goal if there is no clear picture of the cash flow coming in and going out each month. Besides, it easy to set a budget; it is not complicated or fancy.
You need to identify all your sources of income, then determine how you spent your money monthly. Consider fixed payments such as insurance and cable, among others. Also, look at the variable expenditure and get an estimate after reviewing a whole year spending. Now when you have a clear picture, you can make resolutions on which expenses to reduce or eliminate.
Manage Your Debt
You need to prioritize your debt if you have any hope of achieving a meaningful personal finance resolution. Debt is not something you can wait on to clear in the future; the consequences are dire and can derail you from any financial progress. Not prioritizing your debt payment will chain you to an endless loop of a lifetime spent mostly working to repay debt rather than save towards a meaningful goal.
Start by resolving to clear or reduce the debt with the most interest rate this year by paying more towards clearing the debt. The sooner you remove the debt, the better you can feel relieved and increase your savings fund with money that would have otherwise been used to clear your debt.
Financial literacy should be part of your New year’s resolution. Read a lot of financial books that will help you better manage your finances. Knowledge is profit in the financial world. When you learn, you can earn better and wiser. So, always strive to educate yourself this year.