Personal finance is always a hot topic. Money worries often plague our lives and understanding how to grow our cash tree for a better life has always been important.
But after 2020, a year no one will ever forget, the importance of money management has never been greater. Thousands of people have lost their jobs over the last 12 months, and until vaccines roll out globally, thousands more may do so over the next year, too.
Instead of thinking about the struggles of last year, though, it’s time to look ahead and treat 2021 as a fresh start. It’s time to think smartly about our financial situations.
Whether you are looking ahead to retirement, want to build a rainy-day fund, or just want a bit more cash to buy the things you want, money management is for everyone.
There are some vital steps and measures you can take to transform your bank account into a sizeable beast. Here are four essential tips you should consider when looking to build up your personal finance in 2021.
1. Monitor Your Money
This may seem like an obvious step, but we all have to start somewhere. If you don’t already, starting to monitor your outgoings each month is a useful habit to get into.
Monitoring your money will allow you to spot any discrepancies and help you identify the things that suck the most cash out of your pockets.
So, start to keep track of every expense. That includes everything from your morning coffee to the quick Mcdonald’s trip on Friday after work.
After making a note of everything, start categorizing each expense. You will then understand how much all your essentials cost (gas, groceries, rent) as well as the less important stuff.
You may start noticing you spend $10 a month on streaming services you hardly ever watch, which is where the next step comes in.
2. Cut Unnecessary Spending
We all like to think we’re good with money, but it can be surprising just how much we waste on stuff we don’t need.
After monitoring your finances, you may start to come to this realization yourself. The prior mentioned $10 a month on streaming services may not sound like a lot at first, but it can really add up.
This rule isn’t just restricted to subscription services, though. You can also reduce the number of times you eat out each month or implement the 30-day rule (you wait 30 days to buy a luxury item to avoid impulse buys).
It’s so easy to stop wasting money like this. Once you realize how much money you often waste on items you don’t use, you can start saving hundreds each year.
3. Save. Save. Save.
Now that you’ve implemented a money management system and have started cutting down on unnecessary spending, it’s time to start saving.
You can save in various ways, like opening a savings account or filling up a piggy bank (yes, seriously).
Whatever method you opt to do, there are some great rules and principles to follow.
Financial experts often recommend that you save around 20% of your income each month. Known as the 50/30/20 rule, you allocate 50% of your income for essentials, 30% for private spending, and 20% for savings.
You can mix and match this ratio depending on your income and circumstances, but it’s vital to get into the habit of saving.
4. Start Investing
If you’ve got into the habit of saving, and have started cutting down your expenses, a fantastic way of growing your finances is to begin investing.
Investing is a great way to make money and can be far more fruitful than some savings accounts.
When investing is done right, you can make tonnes of money and profit over your initial investment.
But that’s the difficulty here, how do you invest in the right way?
Well, there are plenty of options out there. Stocks and shares have recently dominated the global news industry, and you may think it is a good idea for you to get involved.
If you have the guts, the stock market can be incredibly fruitful, but you run a high chance of losing your investment if you do it wrong.
On the other hand, the property market can be fantastic for investors as it delivers massive returns and is far more stable than stocks.
If you have the cash for it, property is undoubtedly a great option you should consider for investing.
Education is key here, though, as understanding exactly how and where to invest is vital.
Luckily, there’s plenty of guides out there. For property guides and podcasts, be sure to check out RWinvest.
Whatever your financial situation, there’s always more we can do to save our cash. With the right mindset and mentality, 2021 can be a fantastic year for you.