The holiday season calls for spending big on gifts and partying; this also happens to be the perfect recipe to hurl one's finances out of track. No wonder that "spending less and saving more" appears in almost everyone's list of New Year's resolutions.
As far as resolutions are concerned, the first step is always the hardest. If financial wellness appears in your list of New Year's resolutions, then the first place to start would be to analyse your existing habits. You do not have to wait till 2018 to take over the reins of your finances. Simple steps like the ones mentioned below can be implemented even before the end of the year to better your financial position. These will also help you immensely in achieving your money goals in 2018.
1. Set one big financial goal
Financial advisors are of the opinion that you should set one big financial goal for the upcoming year, so that you can start working towards it now. To achieve a goal, it is necessary to break it down to smaller goals that are more manageable. Placing these goals on a calendar with finite deadlines also helps a lot in their realisation. Apart from keeping you accountable throughout the journey, this practice also help you in achieving a major goal over a specific time frame that you may not be eager to tackle otherwise.
2. Create a monthly budget
One of the most optimum ways in which you can develop better money habits is to create a budget at the beginning of each month. If you are a novice in this matter, there are ample budget templates available for free on the internet that you can make use of. The budget should account for your planned spending, your regular bills, and any extras that may need to be included.
3. Dedicate time to get organised daily
Staying on top of your finances is impossible if you do not spend time on it. Spend at least 15-30 minutes each day to go through your mail, sort bills, check account balances, monitor the status of your health insurance policy, and file important receipts. This will certainly help you a great deal in the long run.
4. Monitor your net worth on a regular basis
It is crucial to keep track of your cash flow within the budget, but it is also important to look at the bigger financial picture. You can achieve this by calculating your net worth. You should note that your net worth is the actual measuring stick of your wealth and you should monitor it regularly. You can add up all your assets and incomes and subtract your existing liabilities. This will give you an indication of your net worth.
5. Keep a spending journal
As you inculcate new habits, it is important to be aware of the ones that would hurt your finances. In order to break out of these bad money habits, you can keep a journal that tracks your spending on a daily basis. This would include cash payments, debit transactions, credit card payments, and even monthly transactions such as personal loan EMIs. When you keep track of your expenses for a month, you get a clearer picture of your money outgo. Subsequently, you will realise the benefits of the spending journal and will maintain it for a longer duration.
Another advantage of the journal is that it can pinpoint the areas where you are spending too much. This way, you can take measures to plug those leaks before these result in big financial losses.
6. Check receipts for all payments
When spending at a store, it is important to ask for a receipt and validate the bill against your actual purchase. Some retailers make mistakes while preparing bills, and this could result in a loss at your end. Validating the bill at every purchase is a sure-shot way to mitigate any billing errors. Although this is a small change in the way you make payments, it is a great habit to inculcate for better money management.
You can also store your bills in a folder and check them against the expenses logged in your spending journal. This eliminates oversights and helps you stay on top of your budget.
7. Maintain your vehicle
If you own a vehicle it is important to monitor it on a regular basis and keep it in prime condition. For instance, if you notice an oil leak from the vehicle, get it fixed at the earliest. Ignoring such an issue and continuing to use the vehicle could result in a car breakdown. You should remember that consequential losses are not covered within the ambit of your car insurance policy. So, maintaining the vehicle in good condition is a must to be eligible for a claim.
8. Save 10% of your monthly pay
When you start saving for the future, you can start by moving funds into a retirement kitty. Try to allocate at least 10% of your monthly income for the same. You can have the amount deducted automatically from the bank account at regular intervals by setting standing instructions with the bank. Alternatively, you can invest in a term insurance plan that offers handsome retirement benefits. This is a great way to receive protection and savings effortlessly from a single financial product.
9. Clear your debts
When inculcating good money habits, it is crucial to get rid of your debts at the earliest. After all, it is difficult to start building wealth unless you are debt-free. In line with this, tackle one debt at a time and focus on starting with the smallest debt. By the time you finish paying it off, you would have gained momentum to tackle the next bigger one. All in all, spend lesser and more judiciously while you save more.