It’s the holiday season, and one of the best things you can gift yourself is getting your finances right in the new year. Your financial goals should not be one of those new year's resolutions we are all guilty of falling short on. Getting your finances right in the year will have many short and long-term benefits.
These financial goals will leave you feeling fulfilled from the beginning to the end of the year. Here’s how to set your financial goals and stick to them —yes, you can do it!
Save 10 per cent of your income each month
Let’s put this into perspective. For every $1,000 you earn, you save $100. Your savings help you achieve other financial goals, such as investing, building up an emergency fund, purchasing a car, saving up for a house down payment, or even travelling.
Saving a portion of your income each month may mean cutting down on expenses that are mere wants. A budget that itemizes your expenses can help you identify areas to reduce your day-to-day expenses.
Pay off at least $1,000 of your debt balance
The holidays come with lots of spending. If you have racked up hundreds of dollars in credit card debt, that’s understandable. Make actionable plans to pay off this debt in the new year.
Other types of debt to pay off include student loans, car debt, and even your mortgage. Every money you put towards your debt saves you interest costs and helps you channel your money to other financial needs.
Increase your knowledge of investing
Knowledge can be powerful. Financial literacy makes a difference when it comes to investing and building wealth. A great financial goal can be to read more books on investing, budgeting, and money management.
Investing in assets such as stocks, bonds, and exchange-traded funds are accessible ways to build wealth and grow your net worth. After gaining investing knowledge, the next best time to start investing is now.
Repair your credit score
Life happens, and sometimes we make not-so-good money decisions. If you find yourself with a poor credit score between 300 to 500, make little changes to repair your score in the new year. Improving your credit score can mean paying off your credit card when due, making car loan payments on time, and staying off more debt.
A good credit score helps you qualify for lower-interest loans because the banks do not consider you a high-risk lender. Generally, banks do not want to give loans to individuals with poor credit scores. Even when they do, they charge very high interest rates, which can hurt your finances.
Increase your income
Making more money gives you a better opportunity to achieve your financial goals. Getting extra income means you have more money to save, invest, and pay off debt.
Several ways to increase your income include getting a promotion at work, changing to a higher-paying job, starting a low-cost business, or offering your skills as a service.
An extra $100 a month can go a long way. To increase your income in the new year, help someone walk a pet, babysit, design a website, or manage their social media accounts.
Know where your money goes
Know where every dollar goes — also known as budgeting.
Many people shy away from money questions like: How much do you spend on groceries? How much of your income did you spend on dining out and entertainment? How many times did you shop online in a month?
A budget allows you to see where your money goes and helps you to plan for your income.
There’s nothing wrong with spending money on things you love and want. However, you may need a budget if you are living paycheque to paycheque or have competing financial goals like paying off debt.
The new year is an excellent time to become better at managing money.
Now you know which financial goals to set in the new year and how to go about them. Next, you should get yourself an accountability buddy to keep you in check. Sometimes, you need a little push or encouragement to remember the goals you have set for yourself and stick to them.
Remember, your financial goals are not meant to make you feel beaten down. Instead, you set financial goals to help you improve your finances.
If you cannot meet specific financial goals, don’t get upset with yourself. Keep pushing, and don’t give up.
In fact, you may want to reward yourself for your little wins. Consistency and determination yield results in the long term. Which of the financial goals listed above are you working towards in the new year?