2020 has been a roller coaster for everyone, and while it is a sad year for some who lost their loved ones or their jobs, others are still struggling financially during this holiday season because we’re still in the middle of a pandemic that has limited everyone from doing what they had planned. Despite we know the vaccines are coming, we still don’t have an exact date as to when would all this crisis end. Christmas certainly brought some hope to many, but 2021 is a new year and we need to prepare to have a successful year. As with everything in life, there is cause and effect, and we need to learn to create the financial success we’ve dreamed of when the time comes to start putting our plans into effect. The following are some personal finance rules to follow this new year:
- Get rid of credit card debt
The first rule of personal finance is to never carry a credit card balance. Credit card borrowing rates are egregiously high and paying those rates is an easy way to negatively compound your net worth. If you carry credit card debt for a prolonged period of time, you’re not ready to invest your money in the markets.
- Build your credit
Likely the biggest expense over your lifetime will be interest costs on your mortgage, car loans, and student loans. Having a solid credit score can save you tens or even hundreds of thousands of dollars by lowering your borrowing costs.
- While making a living don’t forget to save
There is a huge difference between making a lot of money and becoming wealthy because your net worth is more important than how much money you make. Having a high income does not automatically make you rich; having a low income does not automatically make you poor. All that matters is how much of your income you set aside, not how much you spend.
- Live below your means, not within your means
Living within or above your means is how you end up going from paycheck to paycheck without ever truly building wealth. The only way to get ahead is by living below your means and setting aside a portion of your income for the future.
- If you want to understand your priorities look at where you spend money each month
You have to understand your spending habits if you ever wish to gain control of your finances. The goal is to spend money on things that are important to you but cut back everywhere else. And if you pay yourself first you don’t have to worry about budgeting, you just spend whatever’s leftover on the things that truly matter to you.
- Automate everything
The best way to save more, avoid late fees, and make your life easier is to automate as much of your financial life as possible. The goal is to make the big decisions upfront so you don’t need to waste so much time and energy tending to your finances.
- Build up your liquid savings account
Your monthly budget should take into account the fact that there are infrequent, yet predictable expenses you’ll need to take care of on occasion. Weddings, vacations, car repairs, and health scares never occur on a set schedule but you can plan on paying for these events by setting aside small amounts of money each month to better prepare yourself when life inevitably gets in the way.
- Save a little more each year
The trick to saving more money over time is to increase your savings rates every time you get a raise so you’ll never even notice you had more money, to begin with. And the sooner you begin setting money aside, the less you end up realizing it never made it to your checking account to be spent in the first place.
- Choose your friends, neighborhood and spouse wisely
Trying to keep up with spendthrift friends or neighbors is a never-ending game with no true winners. Find people to spend your life with who have similar money views as you and it will save you a lot of unnecessary stress, envy and wasteful spending.
- Talk about money more often
It takes all of 5 minutes before I hear about politics in almost any conversation these days, but somehow money is still a taboo subject. Talk to your spouse about money. Ask others for help. Don’t allow financial problems to linger and get worse. Money is a topic that impacts almost every aspect of your life in some way. It’s too important to ignore and sweep under the rug.
- Material purchases won’t make you happier in the long run
Buying stuff won’t make you happier or wealthier because true wealth is all of the stuff you don’t waste money on. Experiences give you a better bang for your buck and time spent with the people you love is one of the best investments you can make.
- Read a book or 10
There are countless personal finance books out there. This stuff should be taught in every high school and college, but it isn’t. No one is going to care more about your money decisions than you. Invest some money, time, and energy into yourself. It’s the best investment you can make.
My book on personal finance dedicated to women but a good read to anyone “Hey girls you can also become badass money makers” is coming up this 2021. Follow me on my social media accounts and stay tuned with the updates! It will be the perfect simple personal finance manual to become financially independent this 2021.
- Make more money
Saving and/or cutting back is a great way to get ahead, but it’s an incomplete strategy if you’re not trying to earn more by enhancing your career. Too many people are stuck in the mindset that there’s nothing they can do to get a better job, take on more responsibilities, or earn higher pay. That’s nonsense. You must learn how to sell yourself, improve your skills and negotiate a higher income over time.
- Find your reason
All of us have a reason to do what we do. If you are able to match a passion with your job, or a second job to earn extra income, it will stop being a job because you’ll be loving what you do and making money or extra money at the same time. Finding a good reason to make more money other than just becoming rich will give your life purpose. Don’t stop until you find it.
Happy and successful New Year!