The holidays are meant to be time spent with the family, to relax and to recharge for the upcoming year. Now that the year has barely started, it is a good time to plan what you want to achieve. Since I don’t like the word “resolution” I will use the word “goal”. Setting goals is crucial if you want success in all aspects of your life: financial goals, personal goals, fitness goals, travel goals, etc.
For 2015, here are five things you should swear not to do:
1. I will not carry a balance on my credit cards
Your first goal should be not to carry a balance on your credit cards so you can avoid very expensive debt. With an interest rate that can go up to 20%, credit card debt is something you want to stay away from.
If you already carry a large balance on your credit card, you should cut back on your expenses and dedicate a portion of your salary to pay it back. To make your life easier, you could program automatic deposits to your credit card. For example, if you earn 500$ per week, you could setup an automatic payment of 50$ the day after you get paid.
2. I will not indulge myself with expensive coffees and fast-food
Not only are fast foods and lattes bad for your health, they are bad for your wallet. I know how hard it can be to stay away from their deliciousness and their easiness, but it can be done. Like any other bad habit, it can take up to 90 days before you free yourself.
Make it a habit to bring delicious lunches with you to work. If it helps, you could even drop a piece of chocolate to make it more appealing. By avoiding those unwealthy expenses, you could lose some serious debt quickly.
3. I will not go over-budget
Making a budget is not so hard. Respecting it, is. That’s why you should be more conservative when laying out your budget but work very hard at respecting it. It’s easy to fall for special expenses that end up bringing you into deficit.
As a rule of thumb, you should not spend more than 30% of your available income on housing and 15% on transportation. You have to resist the temptation to over-extend yourself, especially in these times of low interest since any increase in your rate could bump your monthly payments quite a bit.
4. I will not spend blindly
Do you know where your money goes? If you’re like most people, you don’t really have a clear answer. Most people can tell you quickly where the first 60% of their income goes (their fixed expenses) but the remaining 40% is not as clear.
Once you have a budget setup, each month you should keep track of where your money actually went. This way, you will have an idea if you are doing well or if you should be making adjustments.
5. I will not ignore retirement savings
I believe there are two kinds of savings: the fun savings and the retirement savings. The fun savings are the money put aside for things like travelling, buying a new car, a new house, a bigger TV. The motivation to put money aside for those things is usually higher than the motivation for retirement savings. However, the earlier you start saving for your retirement, the easier it will be.
One way to stay motivated is to invest your retirement savings. Since, in theory, you will only need that money many years from now, you can be a bit more risky with your investments. You might want to try investing in the stock market or exploring different mutual funds. This way, you will save up but in a more exciting way than a traditional savings account.
Article provided by Pierre Roy & Associés, a Canadian Bankruptcy Trustee Firm.