The year 2016 is around the corner and a ton of people are preparing their New Year’s resolutions. One of the topics on everybody’s list will be how they can improve their current financial situation and how they will go about doing so. There are a few simple things anyone can do without too much effort although some necessary research will be required.
Debts, Retirement Savings, And Expenses Strategy
While these three topics might be the most common ones to think of, very few people succeed in doing anything to improve their situation in either segment. Debts are creating a financial strain for a lot of people in the world and as things get out of hand, that strain becomes even more painful.
Certain debts, such as mortgages, can’t be paid off all at once and no one is expecting people to do that. However, there is no reason to keep creating more debts, unless it is absolutely necessary. It is always better to delay certain expenses and focus more on paying off existing debts to reduce some of that financial strain affecting one’s life.
Speaking of delaying certain expenses, our society has evolved into mass consumption. New products are created on a daily basis and consumers are openly encouraged – consciously and subconsciously – to buy anything new as soon as possible. On paper this may all look very innocent with most expenses being relatively small.
But lots of small expenses add up to very large amounts. Those amounts of money could have been used to pay off existing debts, rather than being wasted on things one does not really need. Start creating a monthly budget of how much can be spent on things other than bills, debt payments, and regular expenses, and move forward from there. Granted, this can be a dreadful task, but it will help in managing finances in an efficient manner.
Other than debts and expenses, one has to think about retirement savings as well. Contributing a portion of monthly income into retirement accounts is the best way to go, as it will contribute to one’s pension later on. Thinking about the future is important, especially considering the current financial ecosystem and the strain it is under. Receiving a big retirement check every month will not be possible for much longer unless one takes matters into their own hands.
Start Creating A Diversified Emergency Fund
Unexpected costs and expenses will creep up on you when you least expect it. A car breaking down, a wallet being stolen, or any other unforeseen experience can lead to financial trouble if one is not prepared for it. An emergency fund can go a long way in this regard as it involves putting a small portion of monthly income aside for rainy days.
However, in this day and age, it is no longer viable to put emergency funds into a bank account. Diversifying the portfolio is key to accessing this “spare wealth” when it is most needed. When attempting to withdraw large amounts of money from a bank account, there will – in most cases – be a two to five business days waiting period until funds are available.
One question a lot of people will have is how much money they should put aside to create an emergency fund. Anywhere from three to six months worth of costs would be a good start, although that may be easier said than done for some people. Any amount of money that can be put aside, should be, as you never know when it might come in handy.
There are very few assets that can be exchanged from and to fiat currency in a heartbeat. One of the very few exceptions are precious metals – although their values are declining as well – or digital currencies like Bitcoin. However, that latter option is subject to volatile prices, which can result in big gains or big losses over time.
What about your financial resolutions for 2016 and beyond? How are you planning to change your future? Let us know in the comments below!
Source: CNN Money
Images courtesy of Shutterstock
Also published on Medium.