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Top tips on meeting your personal finance goals in 2021

Couple Planning a Family Budget Photo: TheBalance.Com

Emmanuel Akosile | ConsumerConnect

In view of the wide-ranging negative effects of the outbreak of the novel Coronavirus (COVID-19) pandemic on finances of individuals, families, businesses or organisations, earning more and spending less have become part of most consumers’ New Year resolutions.

However, experts say keeping such New Year’s resolutions can be very tricky.

In fact, many of us probably tell ourselves that we want to earn more and spend less every New Year, but end up doing the opposite because “life gets in the way.”

As a new year starts, therefore, here are some tips that may help you finally achieve your personal finance goal of earning more and spending less this year, courtesy of Daily Inquirer:

Keep new habits developed under Coronavirus-induced quarantine as your new normal. Even if the economy further reopens in 2021 as COVID-19 vaccines become more available, make sure to keep money saving habits that you developed because of the quarantine.

For example, because of the quarantine, all of us were forced to significantly reduce the frequency we go out of town for vacations, buy favourite coffee and eat out in restaurants.

Although we do not need to completely stop these leisure activities when conditions normalise, we should consciously do them less often because the amount we spend on those activities can easily add up.

Besides, many of us now have new habits that allow us to stay entertained even at home. We are also probably used to brewing our own coffee and cooking our own meals.

Personally, I’ve learned how to cook a lot of new dishes that I probably would not have learned how to cook if not for the pandemic.

I also know people who learned how to play musical instruments and started gardening because of the pandemic.

These are hobbies that are worth keeping even when conditions return to normal.

Stop using credit cards. It is easier to overspend when using credit cards, especially if you have a high credit limit.

This is because it is hard to keep track of how much you spend when you pay with your credit card.

Even worse is that when you don’t pay your bill on time or in full, the credit card company will charge you with large penalties and very high financing costs.

These expenses will set you back further in your goal of saving money.

If you still have outstanding balances in your credit card, prioritise paying them off this year and stop using your credit card right away so as not to add to the balance.

Although using credit cards help you make contactless payments, there are other widely accepted methods of making contactless payments that will not put you at risk of overspending.

These include the use of debit cards and mobile wallets. The best part about using debit cards and mobile wallets is that they force you to stay disciplined and stop spending when your budget is already finished.

Open a new bank account where you will automatically transfer a portion of your salary and bonuses for savings and investments.

After all, if your payroll account is already empty, the temptation to spend will be much less, even if there are good deals like in fares and/or 50 percent discounts at your favourite stores.

Ideally, you should set aside at least 20 percent of your salary and 50 percent of your bonuses for savings and investments.

However, do not worry if you are only earning enough to cover your expenses. Just promise yourself that if you get a pay increase this 2021, you will keep your lifestyle constant and set aside 50 percent of your pay increase for savings and investments. Keep on doing this until in the future, the amount you set aside reaches around 20 percent of your salary.

After a while of setting aside money for investments, you will be surprised at how big your portfolio will be, thanks to time and the power of compounding.

Invest in yourself. This does not mean buying things that will make you look rich or successful, but rather investing time and money to develop skills that will make you more valuable, which in turn will allow you to earn more.

If you work in finance and accounting, for instance, take various continuing education programmes on analysing income statements and balance sheets, on how to create financial models or valuations.

You can then use what you have learned to recommend ways that your employer’s profitability.

Or try to learn more about a topic that interests you even if it is not work related, like photography, videography, cooking, baking, history or sports.

There are currently a lot of articles and videos on various topics that are readily available online, so you don’t have to go far to learn about these topics.

Moreover, rather than spending hours binge watching shows online, or posting and monitoring updates on social media, spend more time reading the news to become more aware of current events around you.

At the very least, being knowledgeable about more things will make you well-rounded and allow you to confidently carry a conversation and socialise with different types of people.

This will improve your ability to network which is an important skill for success.

With these tips, it is hoped that by the end of this year, you can proudly say that you are able to keep your 2021 new year’s resolution on personal finance.

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