6 Money Management Tips to Set Your 2021 on Fire!
‘This year, I’ve resolved to save more and spend less. I’ve vowed to make 2020 a debt-free year for myself.’
We’ve all made such promises to ourselves, but these ‘heat of the moment’ resolutions are typically less result-oriented. We all make bad financial decisions. But what matters is how strong our financial resilience is to bounce back to financial stability.
Most people have similar money goals – create an emergency and retirement fund, savings pot, live debt-free. But is it right to treat financial management with such a generalized, universal approach?
It’s always easier said than done. Even if you adhere to the general approach and save to the best of your ability, maximizing results isn’t that simple. Multiple variables can have an impact on your finances. There are financial dependencies, differences in income, different types, and amounts of debt, such as a mortgage or a personal loan. The crux of the matter is to understand how your unique relationship with money works.
This is where most of us get stuck and fail to fulfill our ‘resolution’. While it is important to focus on your goal, it is equally important to lay out a plan to achieve it. Changing your habits around your end goal will help you eventually attain it.
In this article, we will discuss 6 money habits to assimilate into your routine, to bring you closer to your financial goal!
Assess your relationship with money
Ask yourself the difficult questions – why are you trying to get a grip on your finances and what is stopping you from doing so? To get a deeper insight into your bond with money, you need to understand the purposes it solves, in a holistic view. Consider all the uninformed financial decisions that you made, which resulted in a loss. What inferences could you draw from those? Given the chance, what would you have done differently to change the outcome?
Now, think about how much value money holds in your life. If you’re making a purchase, reflect on it – what are you buying? What value is it adding to your life? Identify the purpose and then assess if this purchase is worth spending money on.
Finally, contemplate whether the value that you place on money and your spending habits coincide with your financial goal of 2021.
Trace your steps to backtrack where you spent your money
You may be a YOLO spender or a careful saver, keeping a track of all your expenditures should be at the top of your task list. Whether it’s your monthly installments, bills, shopping receipts, or savings pot, note down the trajectory of your money at all times.
If you’re tech-savvy, use technology (excel sheets/apps) to handle these tasks for you. If you’re more traditional, use a notebook and jot down all your expenses in one place. This will help you see a clearer picture of how much you spend each month and how much you need to cut down to meet your goal.
Develop new habits that align with your goal
Work out a minimum of 3, realistic money goals that support your value and cash flow. Make a list of small, achievable objectives and against them, list the habits that you need to adapt to attain them. For instance, if your goal is to start a retirement fund, start by listing out ways to stash some money aside – cook your meals at home or use a bike instead of your car. Set your value-habit-goal trifecta in such a way that it motivates you to perform better and save more.
Do it the traditional way
Put that whiteboard to use. Put it in the fridge to constantly remind yourself of your daily goals. All this will add up towards your ultimate goal of being a better and more aware spender. Creating a space where you can easily see your goals and tasks every day will motivate you to prioritize your spending. After all, 2020 has given us a harsh reality check about our finances.
Talk about money…seriously!
Finding a bunch of friends with whom you can discuss your life goals is certainly a blessing. So on your next brunch date with your pals, bring up your financial goals for 2021. There’s a psych that works behind this activity. Every time you tell trusted people about your goals, you are re-iterating them for yourself as well. This will help you reinforce your value-habit-goal trifecta and instill a sense of accountability towards the goal. It might also help you bond better with like-minded friends of yours.
Get some help – check with a financial planner
We’re talking about a financial advisor or planner that can help you manage your finances better. These guys are there to help you out with your money matters, so they’re pretty easy to find. Find yourself a certified financial specialist who can help you draft an allocation plan for each of your goals. These goals could be short-term like a home remodeling plan or long-term goals like retirement and homeownership. They give you a holistic view of where you should be in terms of your finances for your current age or income. This will help you re-evaluate your current goals and habits, and inspire you to improve them.
Either you will manage your money wisely, or the lack of it will manage you. The ideal way to improve your financial management is by introspecting your spending behavior. Once you learn what you do, it always makes it easier to not do it. Acknowledgment is the key that opens doors for a wiser future. Life isn’t always hunky-dory and it might throw you off track once in a while, it’s going to be alright, as long as you’re determined to get back on track. A bump here or there only makes you stronger!