The pandemic has upended life and created stress and financial chaos for people of all walks of life across the globe. The good news is that we are into a brand new year. And the bad news is that we still need to deal with the pandemic fallout, and that means our personal finances will continue to be on a roller coaster ride this year.
That said, it doesn’t mean 2021 will be a bust, and it also doesn’t mean that you need to eliminate or postpone your financial goals altogether. Instead, this year, you’ll need to be more focused and strategic about your money goals. This article provides you with tips and insights about how you can navigate the year ahead despite the uncertainties that lie ahead.
Start Your New Year 2021 with These 6 Positive Financial Habits
1. Create a budgetplan
Make use of apps and tools to draw up a budget to keep your financials streamlined. A budget will help you ensure that you are not spending more than you are earning.
The budget will also help you understand how much you can and should set aside every month towards your financial goals which could be paying down debt, making investments, buying a house, or travel.
2. Consider living below your means
Consider establishing a plan to live well below your means. This could mean cutting down on your non-essential expenses like restaurant food, entertainment and monthly subscriptions. When you spend less than you earn, you free up funds, which you can put away into a savings account for emergency situations.
3. Start investing
Investments make sure that you have enough money to take care of your future financial needs. You should start investing for short-term as well as long-term financial goals. Depending on your risk-taking abilities, you can consider these investment options:
- Bank savings account
- Fixed deposits (FDs)
- Recurring deposits (RDs)
- Chit fund
- Mutual funds
- Public Provident Fund (PPF)
- Equity Linked Savings Scheme (ELSS)
- Direct Equity Investment
- Unit Linked Insurance Plans (ULIPs)
4. Automate your savings, debt, and bill payments
It’s hard to spend money if you’ve already made a commitment to send it somewhere else. Creating automatic repayments and bill payments help you avoid late payment penalties, and setting up automatic savings can add up more money into your savings account.
5. Avoid using credit card
Credit card debt is one of the worst kinds of debt because this revolving credit lines have exorbitantly high-interest rates. In such uncertain times, it’s best to avoid using credit cards as much as possible. Only use the credit card for purchases when you are sure you have the financial ability to pay them off in full every month.
6. Clear outstanding debts
Make a list of all your outstanding debts and try to clear off your debt bit by bit by paying a small extra portion each month. You may have to reduce your spending in order to help clear debt. These six financial habits can help you improve your financial situation and prepare you to face the challenges that might crop up as you go through 2021.
Aatish Khanna works with the Content Marketing team at Money Club,a digital chit fund platform that makes saving, borrowing, and investing your money more efficient. He writes on topics to help his readers understand processes so they can make better financial decisions. He’s the go-to person that his family, friends, and colleagues turn to for all their money matters. He loves to play board games and aspires to one day build his one finance-related board game and app.