3 ways to get your finances off to a good start for 2020
It’s that time of the year, bring out the pen and paper for new year resolutions. If you are planning on making new year resolutions that are financially relevant in 2020, then stay on board and let’s look at the options.
Thinking about improving your financial state and to have good financial health for 2020 is a great mindset to have for the new year. On your own, reflect on 2019. Are you happy with how it went? If you could do things differently about your finances and lifestyle in the previous year, what would they be?
Now it’s a good time to start thinking about what you want to change and improve in 2020. Have some time to yourself to work out a realistic budget for your lifestyle this new year. Be sure to set yourself goals and milestones that are realistic and achievable. It does not matter how small the goals are, as long as it is a step towards improving your financial health. #workingtowardsfinancialfreedom
Budgeting is an essential step to control and manage your finances seamlessly. Managing your money well is key to improving your financial health. People tend to think that having wealth lies in earning more, but the truth couldn’t be further. Increasing your income is merely the tip of the iceberg. What’s more important is knowing how to use your money wisely.
This topic itself ranges from knowing your attitude towards money to how to earn, save, invest and even spend. If you earn more and spend even more, it’s no wonder your financial health will always remain in the red. On the other hand, if your earnings are mediocre but you save consistently, spend thriftily and invest the difference, you are financially better off than your peers.
If you’ve never done a personal budget before, it’s not too late to begin now.
- Identify your goals and quantify it. Avoid abstract goals such as “spend less this year” or “bring more homemade lunch to the office”. If your goals are unclear, chances are you will not get any solid results because you can’t track or measure your milestones! Instead, go for “save $500 a month in my savings account and invest $1000 in REITS“. Make it concise, measurable and above all, doable. The last thing you want is to sabotage yourself and derail your success when you realise you cannot keep up with it.
- Start small with your budgeting if you are unsure of how to go about it. Map out your expenses and identify what you are spending on. Setting a realistic budget would help you stick to it and it will also help you keep the resolution longer. If you have a life partner that is sharing a household with you, it is advisable to discuss the budgeting together. It keeps the both of you in check and accountable to one another.
2. Income & Expenditure
Next, identifying your total expenditure of the month is crucial. Total up all of your income (including any side income) and expenditure to have a clear picture of how much you spend on essentials and non-essentials.
With a detailed income and expenditure breakdown, you can identify what to cut down, where to budget and if you have any surplus cash that can be used for savings or investments. Detailing exactly what you spend in a month will help you see how much is allocated towards keeping up with a certain lifestyle.
You’ll probably be surprised that there can be quite a number of non-essentials which you could cut down or eliminate altogether. Putting your expenses and total income on paper gives you a factual perspective towards the state of your finances. With that, it can help to motivate you to improve your financial state for the better, starting from 2020.
3. Financial Literacy
We love the topic of financial literacy, and that’s why we have so many of them on this blog! And they’re for a good reason. If having wealth and money is the fruit, then most certainly financial literacy is the seed. Without the seed, there will be no fruit. But it also takes a faithful and patient farmer to sow, cultivate and nurture these seeds – and my friend, that’s you.
If you want a solid return on your finances (the fruit) – be it prudent management, consistent savings or getting a fair dividend from your investments, you need to a have a good understanding of how money works (the seed). The seed, along with the wise farmer determine the quality of their fruits. Of course weather conditions and external factors play a part (economical and political factors), but on a micro level it’s manageable on our part.
If there’s one thing I would advocate for 2020’s resolution, it’s to be wiser with money. And honing our financial literacy skills brings all the awareness and skills we need to earn, save, spend and invest.
Happy New Year and cheers to a financially better 2020.
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3 ways to get your finances off to a good start for 2020 is written by Serene Tan for syncwealth.io