3 Critical Ways to Improve Your Finances by New Year’s Eve
Making New Year’s resolutions is easy – sticking to them is the problem. Don’t worry; we’ve all gone through motion of promising to “lose weight” or “save more money” only to end up 5kg heavier and embarrassed over the state of our savings before even hitting the middle of the year.
Let’s change that this New Year.
While we can’t offer you any weight loss tips for the upcoming year, we can certainly help you improve your finances.
Here are 3 ways to improve your finances by New Year’s Eve:
#1 Create a budget – and follow through with it this time
Chances are good that you’ve heard the phrase “you need to create a budget” plenty of times during your lifetime. You might have even attempted to follow a budget at one point, only to fail miserably.
Sadly, most budgets fail because they are often too unrealistic, don’t’ account for irregular expenses and are very inflexible. Here’s an easier way to create a budget that’ll work for almost everyone this New Year (if you follow through with it!):
Step 1: Focus on using 50% of your income to cover all key expenses
Your key expenses shouldn’t take up more than half of your take home pay. This includes items such as your monthly mortgage repayment, utilities, transportation, insurance premiums, children’s education expenses and food.
If they take up more than 50%, work towards making cuts in these expenses, such as cutting down on utilities and refinancing your mortgage.
Step 2: Focus on using 30% for savings or unsecured debts
Unless you’re completely saddled with unsecured debts from credit cards and personal loans, this number will work for most people. The rationale behind using 30% of your take home pay for both your savings and unsecured debts is this – you must tackle your debt first.
By taking down your debts faster, you can save faster. And once you eliminate that portion of your 30% that’s comprised of unsecured debts – that 30% becomes savings!
Step 3: Focus on using 20% of your income for discretionary spending
Yes, that means you can use up to 20% of your income to cover the “me” purchases you look forward to every month such as dining out, movie night and even clothes shopping.
Some people might scoff at the liberal benchmark of 20%. But the point is this – if you starve yourself from any entertainment or “wants” by being too stringent, you’ll hate your budget. You’ll eventually reach a point of rebellion and completely abandon the budget (sounds familiar?). This way, at least you can stick to your budget without having to suffer.
#2 Sell your skills to earn more in 2015
Don’t be “satisfied” with what you’re currently making now. The truth is that nobody is just going to give you more money (even if you deserve it) unless you fight for it.
If you’re an experienced professional with several years of experience, you’re in an even better position to improve your finances drastically – but only if you sell your skills.
Here are some ways you can improve your income in 2015 by selling your skills:
Freelancing: Skills such as writing, graphic design, photography, language translation, programming, and social media/SEO skills are particularly in demand and can easily earn you hundreds or thousands of dollars extra every month.
Build a case for a raise: This involves doing a lot of market research regarding how much your skills are worth and comparing that to what you’re making with your current employer. Present these facts along with a list of accomplishments you’ve brought to your company and convince your boss on a salary increase of 5% to 15% or more.
See what else is out there: Finding your market value and listing your accomplishments (and updating your resume) at your current job isn’t just about asking for a raise, but about seeing how much more you would be worth to other employers. Enquiring about jobs elsewhere could land you in a better position next year that will greatly improve your financial situation.
#3 Re-evaluate your financial commitments
Maybe you haven’t re-evaluated your financial commitments because you haven’t created a budget or you rely automatic repayment plans. Either way, re-evaluating your financial commitments should be done once a year, at the very least.
Here are some commitments you should evaluate now to start 2015 on a better financial note:
Your insurance policies: Chances are good that the insurance policies you currently have for years probably aren’t the best value. But if you take time to compare the premiums you’re paying against those of other insurers, you’ll save some serious cash. Start now by comparing your auto insurance policy right here.
Your memberships: Every membership you have should be evaluated not just on price but also on whether you need it or not. It might turn out that the hundreds or thousands of dollars you’re spending on these memberships might be better used to improve your finances. The gym membership you signed when you made that weight lost resolution? It’s time to rethink that!
Your utilities: Evaluating your utilities isn’t just about using less electricity or water. It’s also about deciding whether you really need an expensive phone plan or cable television with 200 channels.
Your home loan: Refinancing your home loan for a better interest rate every 3 years can easily save you thousands of dollars per year. The best part is that comparing home loan interest rates is both free and easy if you visit our home loan comparison page.
The truth is that following even one of the tips mentioned above can greatly improve your financial situation this upcoming year. So imagine what kind of financial shape you’ll be in if you follow all of them this 2015.
Remember – the only way you can make the change for financial improvement is to start now!