In just a few short weeks 2020 will be upon us. Now is a great time to think about your finances and necessary changes to make the most of the new decade. Financial success requires dedication, consistency, and a plan.
Are you ready to figure out how you can tackle this new decade with finance ease? Check out the top personal finance tips below.
Personal Finance Tips for Everyone
1. Review Your Expenses and Cut Back
No one wants to think about cutting back, but if you go back and look at what you spent, you may see areas you can stop the frivolous spending. Pay close attention to what you spend as well as when you struggle the most.
For example, do you find yourself low on funds during the summer or at Christmastime? Use this information to help you moving forward.
Not only can you cut out expensive habits, like coffee stops or take out, but you may want to up your savings game throughout the year so the ‘expensive seasons’ don’t hit you so hard.
2. Create a Debt Payoff Plan
Do you let your debt sit there? Maybe you make the minimum payments but nothing else. It’s time to get serious about paying off those debts.
Just letting them sit and accumulate interest costs you more money and takes away from your future savings.
Find a plan you can stick to, such as the snowball debt plan, and start paying your debts down and eventually off in full.
3. Automate Your Savings
Think back over the last year. When was the last time you paid yourself? Most people do this last and don’t think about it until they are out of funds.
It’s time to automate your savings and pay yourself first. Set a savings goal and then figure out what it takes to achieve it.
How much do you need to set aside each pay period? Set up automatic deposits into your savings account, retirement account, or any other investment that can grow without you dipping into it.
4. Contribute to Your 401K
Yes, we are suggesting that you take even more money out of your paycheck, but it’s to invest in your future self.
At the very least, contribute the maximum amount your employer will match.
For example, if your employer will match up to 3% of your salary and you make $75,000 per year, at the very least contribute $2,250 and get the $2,250 match – it’s like free money.
Of course, depending on your age, you should contribute more than the minimum, but if you haven’t started yet – start now.
5. Check Your Credit
When’s the last time you checked your credit? Just like you get a checkup at the doctor, you should check up on your credit at least once a year.
Grab a free copy of your credit report from www.annualcreditreport.com and go through each line carefully. Look for inaccurate information and report it to the credit bureau.
If you see any negative information that is correct, create a plan to fix it as quickly as possible.
6. Rebalance Your Investments
Use this time to rebalance your investment portfolio. Look back at the last year. How did your investments perform?
What could you have done better? Ask yourself if your investments are too aggressive or not aggressive enough.
As you age, you’ll want to invest in more stable investments and not risk your financial future as you near retirement.
Personal Finance Tips for Young Adults
7. Save your Raise
If you aren’t at the point that you’re ready to sacrifice things quite yet, considering saving your raise.
Act as if you never received it and automatically deposit it into a separate account.
Whether it’s a savings account or investment vehicle, such as 401K, save that money and watch it grow. You won’t have to change your spending habits and you’ll still save for your future.
8. Know Your Debt-to-Income Ratio
Do you live within your means? You may not but don’t realize it – now’s the time to be honest with yourself.
Take your monthly debt payments and total them, dividing that number by your gross monthly income (income before taxes).
A DTI less than 43% is ideal. If you find yourself much over that amount, it’s time to do some restructuring to figure out how to get yourself out of debt and saving more.
9. Create a Budget
Do you have a budget or do you just wing it? It’s time to create a budget you can stick to each month.
It doesn’t have to be stagnant, you can make changes as you move through the year and see how things work out for you. The key, however, is in the consistency.
Make sure you pay yourself every month, putting the money away for savings.
Creating a budget is a great way to see where you overspend, where you should cut back or give you the motivation needed to get a second job or start a side hustle.
10. Annualize all Expenses
Are you the type of person that scrambles at Christmastime to come up with the cash to pay for Christmas? What about other seasons that tend to cost more than others?
This year try annualizing your expenses. Figure out how much you need for Christmas or for your summer vacation and figure out how much you must save each month to reach that goal.
With the money saved, you won’t find yourself scrambling for money during those expensive times of year – you’ll be able to enjoy the time instead.
The Bottom Line
Make 2020 the year that you make the right personal financial decisions. It’s time to take stock of your finances, make a plan, and stick to it. Planning now for your future is crucial.
Even if retirement is 30 years off, it will be here before you know it and it takes a long time to save enough money so that you can live the life you dreamt of once you hit your golden years.
What are some of your favorite personal finance tips? Share your thoughts on the comment section.