As a new year begins, many people have set resolutions for themselves. One very important resolution to make, is to be wise with your financial decisions. Check out how, from the 11 tips below;
1. Track Your Expenses
If you are spending more than you earn, you will never get ahead, in fact, it’s a sure sign that your finances are headed for trouble. The best way to make sure that your income is greater than your expenses is to track your expenses for a month or two and then create a budget. It can be a very simple budget, but you should have one.
2. Pay Off Debt and Stay Out of Debt
One of the best things you can do for your finances is to pay off all of your debt. To get started, focus on your most expensive debt, the credit cards and loans that charge you the highest interest. Once you have paid off all of these debts, focus on paying off your mortgage. For your mortgage, consider splitting your monthly payment in half and paying bi-weekly. Then pay extra as you can afford it. This will shave years off your mortgage and save you tens of thousands of rands in interest.
3. Set Savings Goals
Saving money for your future is crucial. If you don’t set savings goals and steadily work towards them, you will have to rely on credit when times get tough. You might even need to work through your retirement years to supplement your small government pension. Entering retirement may also be delayed or impossible if you are in debt because you need enough money to make all of your payments.
4. Know Your Financial Goals
Having a clear understanding of your ultimate financial goals can help you keep on track and make sure the financial decisions you’re taking are the right ones to help you achieve those goals. Your aspirations can help motivate you and give you a clear sense of purpose. For example, you may want to retire early and travel around the world. Alternatively, you may plan a quiet retirement focused on spending time with your family and friends.
5. Do Your Homework Before Making Major Financial Decisions or Purchases
Many people will do more research before buying a TV than they will before purchasing an investment or buying a home. Make sure that you’re not one of them. Buying a home and saving for retirement are two of the biggest financial decisions most people will ever make.
6. Don’t Be Hasty With Big Financial Decisions
There are no major financial decisions or major purchases that need to be made on the spot. In fact, being pressured into making a hasty financial decision is one of the warning signs that the deal might not be as good as it seems. All worthwhile opportunities will be there another day if you are patient. It is better to wait and learn a cheap lesson, then hastily rush into something and learn an expensive lesson.
7. Understand the Difference Between Wants and Needs
Making smart decisions often comes down to priorities. Your top priorities should be the things you need in order for you and your loved ones to live comfortably. Secondary to that are your wants. these are items you’d like to have but don’t necessarily need them to live. As with any major activity, if you have solid foundations in place before you move on, you’re giving yourself the best possible chance of success.
8. Plan Your Spending
Know the difference between net and gross. First-time workers often experience shock after receiving their first check. Income taxes, social security, and Medicare are just some of the deductions on most worker’s earnings. When joining the work force, make sure to develop a spending plan that takes into account the fact that approximately one-third of your earnings will be deducted from your paycheck.
9. Invest In Yourself
Education and training is your investment in you. This is an important investment in you and
your family. Education means higher earnings for life. Studies show more education leads to bigger paychecks. So, the more you learn, the more you earn. Over a 40 year career, these additional earnings really add up.
10. Always Be Aware of Your Financial Situation
The best decisions are taken from a position of strength. Having all the information you need to hand, rather than relying on guesswork, can play a vital part in ensuring you make the right calls when you have to. A good place to start is to make sure you keep track of your finances. A simple income and expenditure spreadsheet will give you an immediate, high-level overview of your finances.
11. Know Your Options
When it comes to finances, there is no one-size-fits-all solution, so it’s critical to understand your options before making a decision. Before making a final decision, consult with someone who is more knowledgeable about finances than you are. This might be a friend, a family member, a financial expert, or anybody else who can provide you with unbiased counsel.