12.01.2023

FINANCIAL NEW YEAR'S RESOLUTIONS AND HOW TO KEEP THEM

A New Year's resolution is a promise a person makes to start doing something good or stop doing something bad at the beginning of the year. For example, eating healthier and quitting smoking. And how about a promise to save more and clear all loans? If you haven't made any financial New Year's resolutions yet, here are some good ideas.

Review last year's financial mistakes and successes

You can't plan for the future if you don't analyze your past. Review your old bank and credit card statements and see where you stand now. What financial mistakes did you make last year? And what financial achievements make you proud?

Set financial goals and write them down

After reviewing your past financial mistakes and successes, make a list of your financial goals for the new year. They can be overarching, big goals or smaller, specific goals. Whatever you want to achieve, write your goals down somewhere you can see them every day. This will motivate you to not give up when you encounter a difficulty along the way.

Start budgeting

Now that you know what financial goals you want to achieve this year, create a budget to make them happen. How much money do you make each month and how much of it goes to household expenses, child care, commuting, entertainment, clothing, paying off debt, etc.? Calculate your finances carefully and then create a plan of action. Track your spending throughout the month and adjust your budget when needed.

Change your spending habits

Once you've determined what amounts you'll allocate to each category, think about how you spend your money on a typical day. Do you buy coffee every morning? Do you go out once a week for lunch/dinner? Are you paying for services you (almost) don't use? Do you grocery shop without a list? Do you shop online when you're bored? Assess your spending habits and then commit to changing at least one of the bad habits that "eat" your money.

Pay fast, buy slowly

To protect your finances, always follow one simple rule: pay fast and buy slowly. Pay your bills as soon as they come in to avoid late fees and to know exactly how much money you'll have left. And adopt a slower spending approach to reduce impulse purchases and improve rational thinking. This can be done by applying a "pause" between the time you first wish to buy something and the time you actually buy it.

Pay off your credit card balance in full

If you can't pay off your balance in full, at least aim to make more than the minimum payment. Make sure you have the required amount in your bank account before making purchases with your credit card. This will help you break the endless cycle of working to pay off your credit card while adding more expenses to it. Avoid opening new credit cards unless you're sure you'll be able to manage them responsibly.

Talk about finances with your loved ones

To ensure you stay on track this year, seek support from your family and friends. Share your financial goals with them and discuss together how they can help you achieve them – whether that's going out less, choosing more affordable entertainment, or simply being a 'spotter' to keep them updated on your progress. You may also consider the services of a financial advisor.

Take a financial literacy course

Expanding your financial literacy is one of the best investments you can make for yourself this year. Learning more about money management, debt, credit, budgeting, retirement, etc. will help you not only now, but for years to come. You can start by picking up a personal finance book from your local library or educating yourself through various online sources.

Create an emergency fund and build it over time

If there's one thing the past few years have taught us, it's the importance of having some sort of savings or emergency fund. As a general rule, you should have money for 3-6 months ahead. But if you currently have no savings at all, don't try to accumulate the entire amount at once. A great strategy is to open a savings account where a portion of your paycheck is automatically deposited each month. That way, before you start paying your bills, you'll pay yourself first.

Start investing

Investing goes hand in hand with the "pay yourself first" decision. While it may not be the easiest step on this list, investing is one of the best ways to build your wealth. Set a monthly plan to invest x BGN every month and stick to it, regardless of what happens in the markets. There is plenty of information out there with plenty of guidance on building an investment portfolio for beginners. Financial experts advise investing with a longer-term mindset.

And now is the time to make financial promises to yourself and start keeping them strictly to end the year in the best possible way. Be careful not to set too many or unrealistic financial goals. Otherwise, you may not be able to complete any of them. It's a good idea to keep a checklist to track how you're doing throughout the year so you can make any necessary changes in time.