New Year Financial Tips
These New Year financial tips will make sure that you start your year with a bang!
If you’d like to make a massive difference in your life, you need to improve a few things. One of these things is your finances. These New Year financial tips might just do the trick.
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Yep, it’s the time of the year when many of us start making New Year’s Resolutions. Or at the very least, making small goals that we want to achieve for next year.
Like more money. Who couldn’t use more money, right? Or maybe, it’s not the lack of money itself that’s the problem. Perhaps it’s the lack of information.
Whatever the case, this post has a few nifty New Year financial tips that you can use to overhaul your economic life.
We break things down into three main categories: What could you do? What could you read? And who could you ask or listen to?
Side Note: If you want to make sure that the New Year’s Resolutions you make will actually stick this time, read our latest post How to Write Your New Year’s Resolutions.
New Year financial tips #1: What could I do?
For many people who want to change something, the first step is always the hardest, in my opinion.
I believe people find it hard, not just because of fear of the unknown (although most of us surely have a healthy dose of that) but also because most people don’t know what the first step should be.
Let’s take finance, for example. It seems like a completely different language, right?
There are so many new terms you need to learn, so many costly mistakes you could make, so many paths you can take. Where do you even start?
Start looking for advice online, and you could soon found yourself drowning in a relentless sea of information. How do you know which advice to take, what to do and where to even start with your goal?
Start with someone who’s achieved what you want to achieve. When it comes to changing your economic life, I always recommend Jim Rohn, who was America’s foremost business philosopher. According to him, “unless you change who you are, you’ll always have what you got.”
When I found him, I didn’t have much, so I was ready for change. Maybe you’re in the same place, in which case, brace yourself. This is going to be quite a ride.
Side Note: I don’t agree with everything he says, of course. But when it comes to the connection between personal development and financial success, I wholeheartedly recommend it.
Step One: Crunch your numbers and budget well.
This simply means that you need to develop a financial statement.
If you’ve never done it before, you’re probably asking, “What is a financial statement, and how do you develop one?“
It’s actually fairly straightforward.
Simply take a piece of blank paper and draw a line in the middle. On the left side, you list the value of all your assets (everything you’ve got in terms of worth), and on the right side, you name the value of all your liabilities (everything you owe).
You then add up all your assets as well as your liabilities.
Subtract one from the other, and you have your net worth.
If, like me, you need to see something before you can replicate it, some samples are available on Accounting For Management.
Developing a financial statement is super important, but most people miss this step and usually go straight to (trying to) save.
That’s like starting with Step B rather than Step A. It doesn’t work well.
Why exactly do you need to crunch your numbers?
So you have a baseline.
Or to use Jim Rohn’s own words, so you can “take a picture of where you are” and allow you to get to the truth.
You need to know where your money is going and what you can actually afford.
This knowledge then will allow you to develop a budget that actually works.
Speaking of budgets, do you know why many of them don’t work? You know, aside from not knowing where you truly stand financially?
The truth is, most budgets don’t work because they usually do not give you a big enough picture of what’s going to happen.
For example, they often exclude big, one-off spends like a holiday or Christmas.
To mitigate that, we use the Money Saving Expert’s (MSE) FREE Excel budget planner (printout version available here).
When we finally completed our budget, we immediately found the problem: we were overspending even when we weren’t on holiday!
We were paying nearly £90 for mobile and £400 on food per calendar month alone. Now, we know the answer to our very puzzling question: where the heck was all our money going?
Well, thanks to the budget planner, we got the answer. We were able to mitigate what would’ve been a major financial disaster for our family.
The same could be right for you.
You could start your financial freedom journey with the truth and get to that truth by committing to paper all your assets and all your liabilities, getting your net worth and then creating a budget that reflects all this information.
And in doing so, change the direction of your life.
Side Note: Be warned. If you’re doing this exercise because your finances are in dire straits, then seeing the accurate picture of where you are in black and white could feel like a stinging slap in the face.
It will not be pretty.
And it definitely will not feel good. At all.
At least, at first.
But the silver lining in this scenario (and there will always be a silver lining) is that now that you know where you’re at, you can make a plan to change direction. Examine any errors and make the necessary corrections.
You don’t have to keep doing what you’ve been doing that has got you nowhere in the past.
You can change.
And that is something to celebrate.
Step Two: Pay Yourself First (AKA Save).
What’s your next step once you have all the information?
Pay yourself first.
Side Note: If you don’t know why this is so important, read or listen to The Richest Man in Babylon ASAP.
Yes, this step is two actions in one.
This financial secret to getting rich comes from the classic book, The Richest Man in Babylon by George S. Clason.
You need to modify this classic advice a little bit in today’s climate of huge credit debts.
If you find yourself neck-deep in debts with insanely high-interest rates, then forget about saving for now and pay the debt first.
Financial experts say that it’s better to use your savings to clear off debt first because the interest rates for a savings account are at an all-time low.
MSE’s Martin Lewis actually keeps reminding people that it would be better to reduce debt first before saving money.
That said, IF you don’t have any debts or if the interest rates in your savings account exceed your debts’ interest rates, then, of course, you MUST pay yourself first.
According to The Richest Man in Babylon, the money you set aside for yourself must be no less than 10% and should never be spent until you are financially free. In other words, your money needs to make enough money to support the lifestyle you choose without you having to trade your time.
Even then, you’re only supposed to spend the interest. Never the principal.
This is your ticket to wealth.
Step Three: Reduce Your Spending.
Once you know where your money is going and how much you can comfortably afford without wrecking your future, it’s now time to take decisive action.
As we said above, we realised that we were overspending on food and mobile contracts. Impulsive buying was also a primary culprit.
Luckily, our mobile contracts were ready to be upgraded. So, we upgraded to sim-only deals instead of buying new phones and paying them off every month. Now we only pay £27 in total every month, instead of £90.
We implemented a shopping ban that included takeaway to keep to our monthly food budget of £80.
We cancelled many of our Amazon Subscribe and Save orders and unsubscribed from enticing marketing emails.
Most importantly, we started implementing the Debt Avalanche Method to tackle our credit card debts, so we have a more precise action plan.
Step Four: Increase Your Income.
You can do so many things alongside your full-time job that can increase the money you have available. This is very helpful if, like us, you are relying on one stable full-time income.
You can take an inventory of things you don’t need or use but are still in good condition and sell them. We found Facebook Market and trusty eBay really useful in this case.
You could get a part-time job. The holidays are usually the perfect time to do it as most companies, especially those in retail, will be hiring temporary festive staff.
There are also side-hustles galore everywhere. We’ve had much success from things like blogging, affiliate marketing, freelance writing, mystery shopping (we use MarketForce), cashback (like Kidstart) and referrals (like Guestready and Gousto).
Step Five: Throw Money At Existing Debts Like There’s No Tomorrow.
We now have a fair few hundred pounds left at the end of every month. Yes, we’ve finally learned how to stop living from paycheck to paycheck! So, we use whatever’s left to pay off our debts with the highest interest first, freeing up more of our money and drastically reducing our spending.
Use whatever spare money you have to pay off any existing debts.
Good for you!
It’s now time to increase the 10% you save for your financial freedom.
What Could I Read? And Who Could I Ask (or Listen To)?
We’ve lumped these two together because great advice can come from anywhere. You could ask successful people if you know them. Or you could read their books. Maybe browse through their websites.
You probably have other people (financial advisors) or resources (economic classes or books) in mind, but these are our top four.
Essentially, Ultimate Bundles are a collection of e-books, courses, and resources that you can buy together for a discounted price.
If you were to buy each item in a single bundle, you’d probably have to pay over $1,000.
Obviously, we don’t want that.
So, if you’re planning on seriously revamping your finances, we highly recommend Ultimate Bundles’ Master Your Money Super Bundle.
Save yourself a tonne of money whilst still getting the answers you need to every single question you may have.
Jim Rohn was an American author, entrepreneur and motivational speaker.
We won’t get to ask him any questions as he passed away in 2009, BUT we can read and listen to his work again and again.
If you haven’t yet, we highly recommend tuning in to a few of Jim Rohn’s talks on YouTube. What he said then is as true today as it was decades ago.
If you are serious about studying Jim Rohn’s philosophy, take one of his classes that are available online. We are currently enrolled in his One Year Success Plan, and it is phenomenal.
We really wish he were still alive today.
George S. Clason
Jim Rohn credited George S. Clason’s book, The Richest Man in Babylon, as the book that changed his philosophy. So, we went and bought it (and we had to buy it because it wasn’t in the local library), and we have to say that it also revolutionised our thinking.
If you can only ready one book on finance, let this one be it.
It’s cheap (free, if you have it in your library).
It’s a short book and easy to understand. Set in Babylon, each chapter contains a series of parables that discuss the unchanging principles of wealth and abundance.
Have questions on precisely what to do with your money? This book will likely have the answer.
For a more modern take on personal finance, we highly recommend Martin Lewis. His video below talks about debt problems, where to start and what to do about them.
His primary audience is the UK, but most of what he says will be valid across countries.
Final New Year financial tips
As you can see, personal financial development is crucial to a blissful life.
To succeed at this, you need to follow an effective plan that contains a few simple disciplines you can practise every day.
We hope you can use these tips to create a financial plan that you can implement quickly so that you too can get your own economic life in order.
Most of the steps seem common sense, but if you’re anything like us, you might realise that you haven’t really had much financial education.
Seriously, apart from we have to save our money, we don’t really know much.
How much should we save per month?
Where should all this saved money go?
What should we be aiming for?
Wealthy people talk about portfolios all the time, what the heck are those?
What about you?
How was this year for you?
Did you also end up thinking, we need to do something about this money situation? How did you get or keep your finances in order?
Is a money makeover part of your New Year, New You Resolution?
Pop your insights in the comments section below and share your tips and hacks. We’d love to hear from you. 🙂