6 Tips to Improve Your Finances in 2018
As the new year approaches, the time is coming for resolutions and plans for life change. What is your plan to improve your finances?
One of the most common new year’s resolutions that many people make is improving their personal finances. Personal finance resolutions can be a struggle for some people, given that personal finance isn’t readily taught in high schools. This post will give you 6 great ideas for things you can do to improve your finances.
1. Create a Strong Monthly Budget
Creating a budget may sound like simple advice for most people. However, did you know that the average American usually doesn’t follow one?
By developing your own budget, you can plan for expenses each month and set money back accordingly. This will help you avoid late fees with your bills, as well as learning how much money you have after your bills are paid. You can also see how financially fit you are by looking at your income-to-pay-out ratio. Create a new budget each month and tailor your budget to your individual needs. If you are married, make sure that you include your spouse in your planning process. If your spouse is not on the same page as you are, it can make your budget meaningless. A plan never followed is worthless and this is doubly true for budgets.
2. Eliminate Unnecessary Debt
The second item on our list is eliminating debt. Using credit to buy big ticket items may seem like a good idea. Unfortunately, in the end, you end up paying more than what the item is worth.
Financing cars and houses may require a loan, and that is understandable. However, smaller items such as televisions and home appliances can be bought after a few months of saving. By restraining yourself from impulsive buying habits, you can increase your net worth. This also allows you to keep more money each month for savings or investment. One of the best investments you can make is to eliminate debt. You should try to get off of the credit card mentality, and start looking at cash like it is king.
3. Build A Healthy Savings Account
Creating a good savings account is imperative for financial health. By building a strong emergency fund, you can avoid getting
into debt to pay for unexpected items. Those items that you don’t account for in your monthly budget are only the ones to pay for your emergency fund.
When your car breaks down, it pays to have a strong savings account with an emergency fund. This money will allow you to stay out of unnecessary debt. It will also allow you to improve your finances in the coming year. A good savings account will have about six to twelve months of your household expenses. This means that if it takes 1,000 dollars each month to pay your bills, you should have anywhere between 6,000 and 12,000 dollars in a savings account. This may be more than most people would say you need, but it is always important to have money saved up in case of a job loss or unforeseen tragedy.
4. Lower Expenses and Cut Unneeded Spending
Lowering your expenses each month is a great way to improve your finances in 2018. Cutting out wasteful spending each month can free up hundreds of dollars for you to utilize. The money that you were spending on frivolous things can now be put to good use in a savings account or in your investment portfolio. Keep track of items that are not necessary to purchase every month and eliminate them from your budget. If you still feel as though you need to lower your expenses, even more, look into trying to downgrade the products you buy. Look at off-brand clothes, hygiene products, and food. The pennies that you can save will add up in the long run.
5. Invest Money for the Future in Retirement Funds
When you’re out of debt and have lowered your expenditures enough, its time to make some money work for you. By taking your leftover money and investing it into a 401(k) or an IRA, you can build a nest egg for retirement. Most employers will also match 401(k) contributions, so it is important to take advantage of the opportunity early. The power of compounding interest will work in your favor, increasing your return on the initial investments that you make each month. After a few years, you will have a small fortune built. Talk with a financial planner and find out what the best retirement fund is for you. Everyone’s situation is a little different, and there is not set in a stone plan when it comes to investing.
6. Diversifying You Investments with Crowdfunded Real Estate
After you have begun to invest your money into traditional options, you should consider strengthening your finances with real estate investments. In the past, real estate investments were generally out of the average persons to reach, but in recent years crowdfunding has made real estate investment possible for virtually everyone. With crowdfunding, you distribute the cost of investment over a larger number of people who each have stock in the investment. Using this tool, you can invest your money into profitable real estate options that were previously out of your financial reach. This is a great way to diversify your portfolio, even more, giving you financial stability when markets slow down.
By committing to improving your finances in 2018 now, you set your self up to be in a stronger position for the future. Following these 6 pieces of advice can make a world of difference to your finances. Starting early and staying committed will help you achieve your goals faster, and allow you to retire comfortably after your career has ended.
If diversifying your investment portfolio is one of your goals for the new year, click here to learn more about the Real Estate crowdfunding options we have to offer.