Written by: Guest | Best Company Editorial Team
Last Updated: July 8th, 2020
Guest Post by Lauren Wiseman
Many people make New Year’s resolutions to put their finances in order. However, the vast majority of the population doesn’t actually understand what this resolution really entails.
This poses a significant problem. After all, how can you accomplish your mission if you do not know what your goals and objectives are? With this in mind, here are a few worthy financial goals:
1. Establish an emergency fund
The first financial goal that everyone should have is establishing a sizeable emergency fund. You never know when something in your house might break down or someone you care about might desperately need a personal loan.
Moreover, your stable employment contract might unexpectedly get terminated. Most importantly, this is one of those rare financial goals that actually gives you a sense of comfort. Just knowing that you’re covered in case things turn sour might be great for your mental health.
As a rule of thumb, your emergency fund should be big enough to cover three months of your living expenses. Needless to say, this is a minimum suggested figure, while most people suggest that you may want to go for several times this figure.
2. Free yourself from debt
Saving money, investing it, or simply spending it on yourself can all feel satisfying. However, paying an astronomical interest rate for longer than you should is nothing but a waste of money. Therefore, one of your first goals should be to free yourself of debt.
There are several ways to embark on this project and the choice up to you. For instance, if you notice that a single credit card you own has a significantly lower interest rate than the rest, you might want to switch some of your debt to it.
If you find it hard to focus with so many pending debt payments, you might want to consolidate your debts. This will help you turn several smaller debts into a single large one. Although the amount of debt will remain more or less the same, paying your debts off will become a tad easier to handle.
3. Create another stream of income
People with a single source of income tend to be the most vulnerable in an unstable economy. In order to avoid this, try to create another way to earn money as soon as possible.
You can rent out an extra room or a property that you own, find a side job or even start freelancing online.
Freelancing options are numerous. Additionally, this is much more convenient, because you get to customize your own work hours.
In other words, it becomes much easier to schedule and juggle your other responsibilities (your day job, for instance). Still, those who can’t commit to something as time-consuming as blogging or selling arts and crafts on eBay might at least learn how to make money online.
This kind of boost can both help you pay off your debt a bit sooner and establish a more sizable emergency account.
4. Tackle the issue of insurance
Insurance is a problematic financial goal because it is one of those rare investments that you hope you’ll never get to capitalize on.
Nevertheless, this is all about taking calculated risks. Getting a comprehensive insurance plan for your old vehicle doesn’t make much sense.
On the other hand, doing the same for your brand-new luxury car is a different story altogether. As for health and life insurance, you will first have to figure out your priorities.
5. Learn how to stop impulse buying
Finally, one of the worst habits that all of us are susceptible to is the phenomenon of impulse buying. Many limited-time offers and special discounts deliberately create a false sense of urgency.
From a rational standpoint, we may be aware that making this deal is a bad idea, yet, there’s much more to it than that. While this may seem like something too simple and obvious to discuss, learning how to stick to your shopping list and purchase only the things you need is definitely not an easy task.
At the end of the day, it doesn’t really matter how much you earn if you don’t know how to handle your own finances. The most financially successful people develop good spending habits well before acquiring their wealth.
If you are undisciplined financially, your profits may still increase, but so will your impulse purchases, as well as the sum needed for your three months of living expenses. You might even feel more comfortable applying for heftier loans.
And if your profits are growing, your assets become more valuable and protecting them becomes paramount. Instead of waiting for a personal financial crisis to wake you up, start now to establish financial goals that provide security and peace of mind.
Lauren Wiseman is a marketing specialist, contributor to bizzmarkblog.com, and entrepreneur. She helps clients grow their personal and professional brands in fast-changing and demanding markets, strongly believing in a holistic approach to business.