Every year someone somewhere makes a determination to take steps to improve their financial wellbeing. You may have started the year with a goal to cut down or get rid of your nagging debts. Or you could have decided to cut down your credit card expenditure or try to live without the temptation it brings. This could all be part of an overarching plan to spruce up your credit rating.
Many tell themselves they will be more prudent in the way they handle their income, starting by drafting a budget. Wherever you find yourself on your financial journey, such resolutions can become an important turning point in your household’s money management.
But how do you make sure these resolutions bear tangible fruit and don’t end up just noble ideas? Here are some tips that can help.
Create a Budget
One of the reasons your finances could be spiraling out of control is you don’t have a means of tracking how much you earn and how much you spend. A budget will give you a clear idea of how much of your earnings you’re consuming and, more importantly, where your money is going.
The word budgeting is intimidating to many, especially those not too keen on numbers. But it is simply a matter of listing down your fixed expenses such as your rent, mortgage payments, and utility bills. Once you have these down, you will be able to see how much you have left for your entertainment or new clothes.
This will not only help you live within your means, but it will also help you see where you can cut back and channel extra cash to savings.
Improve Your Credit Score
With your budget in place, you can be able to work on bolstering your credit card score if it currently doesn’t make for happy reading. This way, you will be able to come up with concrete steps based on hard numbers rather than just engaging in wishful thinking.
Aided by your budget, you will know which bills you can afford to pay in full to avoid accumulating debt or being overly dependent on your credit card. When you know the areas where you can reduce your expenditure, you can funnel the extra money into systematically clearing your debt.
Even if your credit score is very poor and your budget limits you, you can still make your resolution to improve its work. You can leverage online installment loans for low credit scores to get the extra cash you need to begin clearing your debt.
Start an Emergency Fund
This is another resolution that your budget can facilitate. If you have had to borrow money to help settle a large medical bill, you will know the importance of an emergency fund. But such a nest egg is not only useful in times of adversity. The opportunity to own a house may present itself but find you without a dime to offer for the mortgage deposit.
To create an emergency fund with the recommended minimum of three months’ living expenses, look at areas in your budget you can squeeze for extra cash. Once you have a figure, you can realistically contribute from your monthly budget, head to your bank, and open a separate account that you won’t be able to withdraw money from easily.
To ensure you don’t slack off in your discipline, set up direct debit instructions on your salary account. This way the money will be siphoned off to your emergency account before you can contemplate spending it.
Boost Your Income
In addition to looking for ways to tighten your purse strings and boost savings, your financial goals should include adding to your sources of income. At the height of the COVID-19 pandemic, when many lost their jobs or shut their stores, the importance of a fallback income became crystal clear.
With the global economy getting back on its feet, there are increasing opportunities for you to find a side hustle or a stream of passive income. Many organizations have become comfortable with having their staff working remotely. Sign up as a freelancer on one of the many online platforms and begin building your profile.
Your freelance work can quickly become a reliable source of extra cash you can use to shore up your savings. Alternatively, you can take up an investment with traditional instruments like stocks or the more novel cryptocurrency if you have a higher risk appetite. Learn day vs swing trading a helpful stock trading strategy.
Staying the Course
Financial New Year’s resolutions are notoriously easy to make and easy to abandon. To ensure you go the distance, first of all, write them down. Next, involve your spouse or someone else who can hold you accountable. This way, your resolutions become an action plan and not a mere pipe dream.