Taking care of financial health is equal to taking care of your body. Regular checkups, maintaining healthy habits and proper planning of medication are vital. This 2021, let’s make better and more rewarding financial resolutions.
Let me ask you, how is your financial health? Do you have budget bumps and bulges or financial worries in your life? In this case, you may need to do an annual checkup to assess your financial fitness and start getting your family’s finances in good shape.
To start with, the following questions will help you get a better understanding of your financial health:
- Do you spend less than you earn?
- Do you expend no more than 15 to 20 percent of your monthly income for credit payments, including car payments, credit cards, and all other debts?
- Do you have an emergency savings fund to cover at least three months of your living expenses?
The following points will help you get a better look at your finances and make better new year’s resolutions.
- Identify your goals: It is essential to have a long-term vision and goals before you make any financial resolutions. The goals will help to steer clear the path from various distractions. Statistically speaking, the rate of success increases if you make and follow SMART goals, i.e.
It will help you determine why you want to accomplish a goal, what you are trying to accomplish, by when do you want to complete it and how.
Let’s take an example. If you are trying to buy any luxurious item then before buying you should ask these questions to yourself: What is motivating you to do it? How much do you intend to pay off? By when? And how do you mean to succeed with making the payment over the period you’ve chosen?
- Make a flexible budget: Develop a life-changing new year’s resolution of maintaining budgets. However, the demanding part would be sticking to it. Make adjustments in your spending habits and ensure that you are keeping them below your income levels and leaving enough room to save for your goals and pay off the debts. It is always a good idea to make a monthly budget a few days before the month starts by sorting your finances in proper terms.
- Identifying the flow of income: Before you track your expenses, it’s crucial to have a look at the income flow from the bird’s point of view. Take notes of what your regular income is, how much is your paycheck and what it looks like after taxes and expenses.
- Track your expenses: Record and categorise your expenses under different heads such as shopping, health, emergency, education and transportation. It will help you analyse and have a holistic view of your transactions, keep your budget in balance and reduce impulse purchases. Categorising your future expenses into want and need will act as the cherry on top. Understanding the difference between a ‘need’ and a ‘want’ will contribute towards building healthy financial habits. Take a financial resolution this new year to make a seven-day expense journal.
- Kick the habits that make you spend more: If you tend to eat out frequently or attend social parties, it’s time to pay attention to them. Try to replace these habits and maintain a monthly budget for your social life.
- The habit of saving: Incorporating the habit of saving, or as we call it The Habit of thrift in oneself, is life-changing and leads to the brighter side of life. It is a daunting task at the beginning, but it gets easier. We can look at it from a perspective where we see ourselves paying to our future self. If you don’t know where to start, then think of saving it for an emergency fund, a vacation, buying a home or settling with a family- anything that keeps the momentum going for you.
- Invest for the long term: Anyone can invest, but having a smart investment policy will help you have sound financial health in the long run. Just saving the money won’t help in the growth of wealth. Investing in Gold, Property, house, shares are profitable in the long term.
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- Avoid and Clear your debt: Having debt is a sign of bad planning and bad for financial health. It acts like an anchor which will stop you from being financially healthy and peaceful. To keep your debt in check, one must clear it as soon as possible, no matter how much it crunches the savings. It is because getting out of piling debt is as burdensome as finding a needle in a stack of hay.
- Become accountable: Consider getting an accountability partner or partners. These are the people you share your financial goals with, who are on the same journey as you or have already accomplished something you are working towards.
As we know, proper planning a day will keep the fear of financial disruption away!
Make your financial resolutions with us and let us help you give your finances a better shape this 2021!