Steps To Improve Your Financial Health For The New Year30 Apr 2021
The end of the year is a time for reflection. Many of us will think about the things we didn’t manage to accomplish and how we can change that in the new year.
Deciding to become financially healthy is among the more common New Year’s resolutions. If you’ve been meaning to get better at managing your money, here are 4 actions you can take now to be more financially secure by the end of next year and beyond:
1. Determine your financial goals
Identifying your financial goals in advance is the first step towards taking control of your money.
Think about what’s important to you. What do you want to achieve in the short and long-term? This will help give you focus and clarity on how you should save and spend your money to accomplish your objectives.
Common financial goals include paying off credit card debt, building an emergency fund, saving for a vacation, saving for retirement, and buying a home or car, among others.
2. List down your income and monthly expenses
Compile all your monthly bills and bank statements. Start a tracking sheet, list down all of your earnings and monthly expenses, and categorise your expenses as fixed or variable. Include the due dates and minimum payment required, where applicable.
Fixed expenses are the payments that often reflect your needs and remain relatively consistent from month to month. Examples include utility bills, rent / mortgage, and car installments. On the other hand, variable expenses typically reflect your wants and differ significantly from month to month based on your lifestyle and spending habits. Examples include travel, entertainment, dining and gifts.
3. Evaluate and adjust
Once you’ve documented all your income and expenses, add up both columns and see where the difference lies.
Do you earn more than you spend? If yes, you’re off to a good start! You should put away some of your excess cash into an emergency fund, and also think of ways to make use of it to grow your income further.
On the other hand, if you spend more than you earn, it’s time to make some changes. Find ways to trim your variable expenses, and if necessary, your fixed expenses as well. Is there another house or apartment with a cheaper rent that you can move to? Can you switch to a different service provider with lower rates for your phone and internet? Cut down the number of times you eat out? Downsize to a cheaper car? Workout at home instead of paying for a gym membership?
Depending on how significant your debts are, you may also need to look for ways to increase your income.
4. Draw up a budget and start tracking your expenses
Determine your expected monthly expenses for the new year
Once you’ve gone through all your expenses and determine what you need to cut back, work out a budget to plan how much you will spend and save each month to achieve your goals.
Track your expenses daily, and be sure to stick to the limits you’ve set. Do keep in mind that your overall goal is not to worry about everything you spend on. What’s important is that you are aware of how much you have available to spend and where your money is going.
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5. Fine-tune your budget as you go
A budget is not static. You should make any necessary adjustments if you find that you overestimated or underestimated your expenses. And do continue updating your budget as you go through career and life changes, like getting married and starting a family.
Taking action to improve your financial strength is a great way to ring in the new year, as it is the first step towards a healthier financial future, which will also have a positive impact on your emotional and physical health.
Another important thing to do, if you haven’t already, is to ensure your finances are protected from unexpected life events and health emergencies that can derail your long-term goals. Consider our range of life and medical protection plans for your insurance needs. Our Gibraltar BSN Agents can also provide assistance in choosing a plan that’s right for you. Simply leave your details here, if you’d like us to get in touch.