5 Financial new year’s resolutions to implement now
The new year is an ideal time to set some resolutions for yourself.
And that’s especially true when it comes to your finances.
If you feel like you’re struggling with your money, not getting ahead as quickly as your peers seem to be or simply need a quick refresh, now could be the time for you to try setting some financial new year’s resolutions.
Now is the time to cut costs
Everyone has those line items in their budget that don’t really need to be there. Do you really need that cellphone contract that costs you R900 each month? Do you really need those three different subscription boxes but can’t remember the last time you enjoyed a product? It’s time to get out your last few bank statements and study each line item. Look at each one and question whether it adds value to your life. If it doesn’t, get rid of it. And if it does, but seems pricey, see what you can do about negotiating a lower rate. Your car insurance provider, in particular, might offer a lower rate.
Now is the time to stop spending unnecessarily
Did you really need that new pair of sneakers? How about that lunch out when you had packed a perfectly good meal? No, you very likely didn’t. It’s this kind of unnecessary spending which can very quickly eat into your salary. Before you’ve looked, you’ve spent your salary for the month and don’t have much to show for it except those fancy shoes and distant memories of burgers. Strive to go for many days at a time without spending a cent. You might be shaking your head right now, thinking it’s impossible. But it’s not. It’ll take some getting used to and some self-discipline. But you’ll soon enjoy your new, simple lifestyle which doesn’t include daily trips to the shop.
Now is the time to pay off your debts
Financially, there’s not much worse than having debt hanging over your head. It’s recommended that you pay these off as soon as possible. There are two popular ways of going about this – the debt snowball or the debt avalanche. The snowball sees you tackling the smallest debts first and then rolling that amount into the next smallest debt, allowing you to quickly feel a sense of accomplishment. The avalanche sees you tackling the debt with the highest interest rate first. Because you paid off the debt with the highest interest rate first, you’ll save money on interest. Both of these have their benefits. It’s up to you to decide which would encourage you to keep paying off debt. It’s very unlikely that this debt will just go away. There is, however, an exception. The Prescription Act is when a debt is extinguished over a period of time. This means that you will not have to pay a creditor after a certain period of time has passed. This happens if a credit provider doesn’t demand payment from you, start legal action against you or communicate with you in any way for a certain period of time. Different types of debts have specific time periods.
Now is the time to start saving
Financial experts recommend that you should have at least three months’ worth of living expenses stashed away in a rainy day fund. This is the fund you’ll use should you be retrenched, suffer from an unexpected medical emergency or are involved in a car accident. This will prevent you from having to put that expense on a credit card or take out a personal loan. In addition to your rainy day fund, it’s also a good idea to save money in a Tax-Free Savings Account. You’re able to save R33 000 yearly in these accounts and you’ll never have to pay tax – not when you’re contributing or withdrawing funds.
Now is the time to start investing
Once you’ve done, or at the very least started, all of the above, it’s time for you to begin investing. This is the most effective way of growing your wealth. You see, bank accounts offer very low interest rates which don’t keep up with inflation. That means as long as your money is in a bank account, it’s effectively losing value each month. Investing, thanks to the power of compound interest, offers you the opportunity of increasing the value of your money. And if you hope to retire one day, this is how you’ll go about making that possible.
None of these steps is too difficult. In fact, most of them are quite simple. When taken one by one, they’re completely achievable. By the end of 2018, you could be in a far better position financially than you were the year before.