Money-Savvy: Here Are the Best Financial Tips for the Year Ahead

Money-Savvy: Here Are the Best Financial Tips for the Year Ahead

Though we were all happy to see the back of 2020, our troubles are far from over.

With the pandemic taking a heavy toll on our economy, many households are still under a lot of pressure. Studies show that people are just as worried about their finances as they are about their health. The worst thing is that nobody knows how long this will last.

The good news: there are some things you can do to take control of your financial journey. Here’s a list of effective financial tips that can help you polish your plan for this year.

Set Measurable Goals

Setting goals can be a big help with creating a proper budget. That said, those goals should be more detailed than, “I want to save money this year.”

To create measurable goals, you first need to define exactly what you want. Then, make a realistic estimate of how much money it’s going to take to achieve those goals. Finally, determine how long you’re willing to wait to make that happen.

With a big picture like that in mind, you can start working backward. Look at your goals and figure out how they’ll affect your budget. Chances are, you’ll have to choose one or two goals to focus on, which is totally fine.

Here’s an example of a good first goal: creating an emergency fund. If you fall on hard times, an emergency fund can act as a cash cushion. Anything you can save up helps, but aim for having enough for 3-6 months of expenses.

Write the Budget Down

Writing your budget down can serve as a powerful motivator. You can do it on anything from an Excel spreadsheet to a budgeting app.

If you want to have a realistic budget, you’ll need to take a look at your spending habits. Start by breaking down your expenses into two categories: fixed and flexible. The former are recurring (like rent) and the latter can change (like food or clothes).

For more help, pull up your recent bank and credit card statements. This will give you a more specific idea about how much you spend. Compare this data with how much you make, and you’ll know how much money you can invest in your goals.

Consider Investing

Did you keep track of the whole GameStop stock controversy? If so, it might have convinced you to give this investing thing a chance.

A good first step would be to start an investment account such as Roth IRA or your 401k. The money you put into it will earn interest, which will earn more interest over time. This compounding growth means that even small contributions can balloon to big gains.

Of course, this also means that you should start investing as early as possible. Depending on how much you put into your account, it may take a few decades to reap great financial benefits. This method isn’t as sexy as day trading, but it’s far more secure.

Refinance Your Debts

Holding debt isn’t a bad thing by itself. The main issue with debt is that paying it back can prevent achieving other money goals.

If you do start feeling overwhelmed by what you owe, consider refinancing. This is a way to redo the terms of your remaining loan balance. Most people refinance to lower their interest rate, but you can also do things like changing the length of the loan.

Now, what if refinancing your debt doesn’t help you qualify for a lower interest rate? Well, one alternative is to consolidate the balances of several loans into one. Other than lowering your interest, you’ll only have one monthly payment to worry about.

Keep Track of Expenses

Creating a tight budget isn’t about cutting out all your indulgences. If anything, this is more likely to make you abandon your money plan.

That said, it’s a good idea to figure out how your spending adds value to your life. For example, a late-night margarita can often be the highlight of our entire week. Balance the worthwhile expenses with those that aren’t pulling their weight.

You’ll want to pay particular attention to recurring payments. We tend to focus on one-off expenses, but the monthly expenses add up quickly. If you’re spending half of your income on rent, wouldn’t it be better to look for a more affordable spot?

Get Paid Early

Struggling to make ends meet until your next paycheck rolls around? If so, there may be a way for you to get paid early.

The idea here revolves around a solution called earned wage access (EWA). This allows employees to access wages they’ve earned a little early. The Payactiv version above allows you to get 50% of your paycheck or $500 before your next payday.

Keep in mind that this is different from relying on payday lenders. Though they seem to offer services similar to EWA, they also charge interest. By taking up their offer, you’ll end up paying them more than what they’ve loaned you.

Tweak Your Plans

Most financial goals we create for ourselves will seem achievable at first. Sometimes, though, they can get away from you.

For instance, your circumstances may change. You may end up switching jobs, moving to a new apartment, or even traveling to another city. You may also realize that you need more margaritas to keep you going.

These things do happen, so don’t be afraid to postpone your goals or treat yourself more often. Focus on progress instead of perfection and tweak your plans if necessary. Celebrate the successful times and don’t fret too much about not being 100% on track.

Other Financial Tips to Keep in Mind

Building a yearly budget can help you get your financial life in line. Focus on measurable goals and balanced spending habits and you’ll be fine.

Here’s a final tip for you: use automatic payments whenever possible. This is a great way to ensure your money goes where it needs to go. While you’re at it, consider asking your employer to send portions of your paycheck to different accounts.

Looking for even more financial tips? Interested in professional financial advice? Keep reading our Business & Finance section!