New Year’s Resolutions or Financial Goals
Every year the same dance begins. We look back onto the last 365 days and realize we haven’t turned our life around. What’s the next logical step you might ask?
It’s easy we engage in the yearly ritual of New Year’s Resolutions. 2021 is a blank slate that we are determined to transform into a new chapter. From new diets, learning a new language, or more exercise everything will change. Instead of seeking a gradual change, we decide to make drastic changes.
We never stick to them. How many times have I told myself: “Next year I will exercise every day” more than I would care to admit. Unfortunately, I cannot say I’ve stuck to it so far.
So why not try a new type of New Year’s Resolutions? Let’s set financial goals and build the base of new healthy habits. Whether you decide to try out all of my tips or only to set 1 goal is up to you. Remember small changes are always preferable to no changes.
1. Build an Emergency Fund
If you don’t have one yet this should be at the top of your list. If 2020 has taught me anything it’s that life is highly unpredictable. Building an emergency fund is a great way to cover your back.
You are ready to face any curveball directed at you. Take a look at your essential monthly outgoings from food, rent, and energy. Then keep in a high-yield saving account the equivalent of 3 to 6 months of these expenses.
Learn more about building your emergency fund for 2021 with my article “How To Build An Emergency Fund”.
2. Invest in being debt-free
Consumer debt is a plague in today’s society. The average Personal Debt in the US was $16,529 in 2018. You might think if everyone has it why do I need to pay it back? Isn’t it just part of life? I’ll make more money by continuously investing.
If you are an Index Fund Investor and invest in an S&P 500 tracking fund such as VTI or VUSA. You can expect an annual return of around 7% although it could very well fall. On the other hand, Credit Cards charge an APR of 16+%.
When you invest you are hoping for a return nothing is guaranteed. All you have to do to get an instant return on investment of 15+% is repay your debt. It’s the first step towards Financial Independence.
If you can’t afford to pay the balance in full, work towards paying more than the minimum deposit. Future you will thank you!
3. Plant the first seeds
2021 is the year to invest your first $1. It might sound scary, risky, or even pointless to invest so little. Your mind is more at ease with the cash in a savings account. There is 1 simple problem with that…
High-yield saving accounts earn around 0.6% at most in 2020. Whereas inflation is on average at 1.2% in the US. You effectively lose 60 cents by 100 dollars you keep in the bank.
You can start investing easily today with Vanguard for example that offers a wide array of index funds. If you were to invest $1 per day into an S&P500 index fund you would have 16,949. The power of compounding interest is mind-boggling.
If you want to learn more about investing with Vanguard and Index Fund investing discover my article “How To Start Investing With Vanguard”. If you want a no-fee and easily accessible trading, I use “Trading 212”. Give it a try with as little as $1 and if you use my link you will get a free share valued up to $100.
Change your life by getting a headstart on your New Year’s Resolutions by starting today.
4. Learn Something New
If you are like me you need to know what you are getting into. It might be the Swiss in me but I like planning ahead. On my side, I use 2 tools books and financial podcasts. My favorite is adding a book to my library as I can always come back to it and grow my knowledge.
If I had to read 1 book on the subject it would be “Your Money or Your Life” by Vicki Robin. If you are one of my regular readers you probably can’t stand me talking about this book anymore. But it truly changed the way I view money and my relationship to finances. I won’t spoil any more of it but it will change your life.
As for podcasts, there are thousands out there, I was lucky enough to be on an episode of “The Art of Money Saving” that you can find here. Otherwise, I strongly recommend fasttrack.life as Yasi Zhang regularly receives high-profile guests that breakdown the essentials of Personal Finance.
5. Just Talk
This New Year’s Resolution is simultaneously the easiest and hardest. The best way to grow your wealth and hopefully achieve financial independence is by talking about it.
Well no… but it’s a great start. Sharing your experiences and asking experts about their’s will lead to a higher understanding. You liberate yourself of stigma and make financial decisions more rational. Yet one of my favorite quotes comes to mind:
“Money is the last taboo. People will talk about their sex lives before they discuss their finances.” Marvin H. McIntyre
Money is kept in a sacrosanct position. Society and big firms will have you believe that it’s a private matter. Yet, knowledge is power. So start talking!
What will yours be?
Now it’s time to decide what will you do? Don’t pick too many choose 1 and get started. It doesn’t need to be suggested here. I personally have the goal to have £10,000 invested by the end of 2021.
To achieve it I will need to increase my monthly contributions as soon as I get a raise or am able to monetize Cent by Cent. I also aim to make my blog a secondary source of income for 2021 and further.
What will you be doing to better your financial future?