5 Personal Finance Resolutions for the New Year

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With the year 2022 just a few days away, make it a new year for your finances as well. Here are five ideas for personal finance resolutions.

  1. Take care of first things first: family

You’ve heard it said: “Family comes first.” It’s true. Don’t start pouring money into investing until you’ve made sure your family is taken care of. Ensure these three steps:

A. Start by putting adequate cash away into an emergency fund.

B. Make sure you are protected with health insurance so that an illness doesn’t wipe you out financially.

C. Make sure you are carrying enough for life insurance to protect your family should the worst happen.

Don’t invest a single dime until the above three steps have been taken. If you haven’t taken all three of these steps yet, make your resolution for this year.

  1. Increase your income before increasing your investments

There’s an old saying: “It takes money to make money.” Unless you have a lot of money and time to invest it, what you invest isn’t going to make you rich for the average person. FreeFinCal recommends that it would be smarter for younger investors to focus on increasing their income. Having more money allows you to have more to invest, thus, allowing you to earn more from your investments.

  1. Take inflation seriously

Don’t just look at the CPI (consumer price index) as an inflation gauge. The CPI number is a broad range across several costs to arrive at an average for all of them. However, your personal amount of inflation could be significantly higher or lower. How inflation affects you depends on where you personally do your spending. If your personal inflation amount is higher, you could be coming up short on your estimates. A good way to determine your personal inflation rate is to use a personal inflation rate online calculator as a way of gauging your costs. You may want to do this every month to see if your personal inflation is increasing or decreasing.

  1. Focus in this order: Goals, strategy, investment

Some people are worried they need to invest and make investments without considering goals and strategy first. Make it your resolution to do things in the following order.

A. Goals: Goals come first. What you invest in and how much you invest always needs to align with goals. This will vary according to your age, marital and family status, career, health, and other factors.

B. Strategy: Once you have determined what you need for your situation, you need to develop a strategy for getting there.

C. Savings: You need to have two separate savings: An emergency fund and an investment fund. Ensure the emergency fund is full before putting any money into the investment fund.

C. Investment: Start making investments that align with your goals, based on your developed strategy.

  1. Look at history, not trends, and be patient

Many new or beginning investors make some common mistakes. The first is waiting for the right time to invest. You can lose months of time that could be accumulating units (stocks) or earnings. Don’t delay or stop your investments due to market fluctuations. Another mistake is pulling money out because of a dip or moving it to something else that is at an all-time high. Look at the history and look for consistency, especially despite market conditions. The secret to building wealth is patience and consistent investing.