Personal Finance Tips for 2020 and Beyond
As the new year comes around, for many it means a time for resolutions and reflection. We reflect on the previous year to see if we achieved the goals we wanted to or made the changes in our life we were seeking. And it doesn’t stop at your finances. Many people will set financial goals for the new year in hopes of living their life free from financial stress.
We’re here to give you some of the best personal finance tips for 202 and beyond. Continue reading to learn everything you need to know to achieve your financial goals for this new year.
Setting Personal Finance Goals for 2020
Setting goals for the new year is always a good idea to help you stay motivated and on track. It’s important to set realistic, achievable goals so that you do not get burned out on your financial journey.
Some examples of good personal finance goals are: paying down credit card debt by $2,000 or saving an additional $4,000 to pay off your mortgage faster. These goals can then be broken down into smaller goals like saving an additional $300 per month to pay off your mortgage or paying off an extra $166 per month on your credit cards.
Stick to a budget
Creating and sticking to a budget is one of the greatest things you can do for your personal finances. It allows you to keep track of your spending and helps you to stay disciplined when times are tough. Some people enjoy a cash budget or an envelope system in which you use cash to purchase things and when the cash runs out, you can’t spend any more. While you don’t have to use this system, we encourage it for people who have a hard time staying disciplined with plastic.
The goal of your budget is to have $0 at the end of each month. Your money should be allocated into specific categories until you have none left. If you have additional money after subtracting all of your monthly expenses, this money should be allocated towards savings.
Need help creating a budget? Read our article onhow to create a budget here!
If you’re having trouble sticking to your budget, consider using budgeting apps like Mint or Youneedabudget to help automate your budgeting process.
Pay off debt
Paying off debt is one of the most common New Years resolutions when it comes to personal finance, and many times, it is the most important. Interest from debt can be crippling to your personal finances, so paying down your debts is a no brainer.
How to Pay Off Debt
Paying off your debts may not be the simplest goal to accomplish. No matter the amount you owe, coming up with the extra money can be challenging, but not all hope is lost. Follow the steps below to help you pay off your debts.
Step 1: Have positive monthly cash flow
What makes paying off your debts so difficult is not having enough positive cash-flow to make any progress. Each month, you’ll need to produce more income than you spend. If you’ve already created a budget, you should know what your monthly cash-flow is. If not, write down your monthly income and all of your monthly expenses. Then subtract your income from your expenses. If you’re in the red, you have two options: increasing your income or decreasing your expenses. Many times the first option is more difficult than the second. Decrease your monthly expenses until you are cash-flow positive so that you can pay off your debt faster.
Step 2: Refinance your debts if possible
The second piece of what makes paying off debts so difficult is that the amount of your payments that go towards interest. If possible, consider refinancing your debts into one larger loan with a lower interest rate. This will help you pay off your debts faster and lower the amount that you pay in interest.
Step 3: Pay extra on your debts
After refinancing your debts if you are able to, paying extra is critical to expediting the process. Make sure that your extra payments go towards the principle balance to lower the total amount of interest you will end up paying.
Step 4: Continue making payments
The last step in paying off your debts is the least fun. Continue making payments until your debts are completely paid off. This can take some time depending on your balances and income.
Lower your monthly expenses
Lowering your monthly expenses is one of the best things you can do for your finances. It allows you to allocate more of your hard earned money towards savings or investments. There are many ways you can lower your monthly expenses. From saving on your electric bill, to cutting the cable, you should always be on the lookout for easy ways to save on your monthly expenses. Read 13 ways to lower your monthly expenses here!
Ditch the car payment
Car payments can cause headaches to your personal finances. Those innocent monthly payments are not as innocent as you may think. Ditch your car payment and use your savings to pay off other debts or use it to invest. Sell your vehicle in order to pay off your loan and use the leftover money to purchase a less expensive car.
Invest, invest, invest
Investing your money is key to long term financial success. Whether you have $100 or $10,000, investing your money is one of the best decisions you can make. There are many options when it comes to investing. Stocks, bonds, CDs, savings accounts, real estate and more are all ways you can invest your money. Depending on your financial situation some options might be better suited for you than others so be sure to do your research before making any investment.
Looking to start small? Read our analysis on how to invest $500 here!
Getting your finances in check this new year is one of the best decisions you can make for your future. If your goal is life ling wealth, you have to start somewhere. No matter how much you make or how much debt you have, anyone can achieve lifelong wealth if you manage your finances correctly. Start by creating a budget or get motivated to stick to your current budget, then aim to pay off your debts. You can then start investing your money and let it work for you.
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