Welcome to 2018! It’s that wonderful, somewhat dreaded time of the year. What are your resolutions for the year? Being healthier is certainly one of them but don’t neglect your financial aims while you’re at it.
Starting the year with an ambitious, yet realistic list of financial goals is an invaluable way to keep yourself in check; despite the fact that research shows that most resolutions fall apart within six months, people who commit themselves to a resolution are 10 times more likely to reach their goals than those who ignore the popular custom.
Here are the 10 money-related resolutions to help you build wealth in 2018:
- Eliminate your debt: As a general rule of thumb, you need to be comfortable with the amount of debt you have excluding your mortgage. Don’t bury your head in the sand – it’s best to face your debts before they spiral, paying off the ones with the highest interest rates first – such as credit cards debt – as you shift your spending to debit cards and cash.
- Build up your emergency savings: Experts recommend putting aside 6 months’ worth of income for a rainy day. Yes, it’s crucial – should you lose your job, or fall unexpectedly ill, you’ll have a secure financial cushion in place to take care of all immediate needs and help you get back on your feet. But it also means you have more freedom to start exploring new professional and entrepreneurial paths.
- Know your credit score and net worth: Net worth is the difference between what you own (assets) and what you owe (debts). Knowing your net worth forces you to understand the reality of where you stand financially. Your credit score is another important ‘reality check’: the higher your credit score, the better your chances of securing a loan, mortgage or even just a phone contract.
- Grow your income: Leverage your skills and your knowledge, which we know you’ve got plenty of, to boost your cash flow. Be confident: don’t be afraid to ask for a promotion or a raise this year. Once you get the momentum going, your earnings should peak in your 40s and 50s.
- Plan your budget: It may not sound particularly exciting, but writing out a plan will help ensure you’re spending less than you earn. Once you have an idea of your spending vs. your income, you can set aside a set amount of money each month to put into a savings account – contact your bank to set-up automatic monthly transfers. You can also take control of your spending with some handy apps. Personally, we’re fond of the 50/20/30 budgeting rule.
- Prepare for retirement: The earlier you start planning for retirement, the less stressful and more stable your future will be. The main advantage of pensions is the tax-relief on contributions. Understand it as free money or a pay rise. Depending on your employment status, you can save mainly into a workplace pension with auto-enrollment, a SIPP or a personal pension. Don’t base retirement plans only on your expected state pension…
- Set personal goals & get acquainted with investing: It may be daunting for first-timers but it’s time to get comfortable with the idea of investing. In a low interest rate and rising inflation environment, you could make more of your money with interest compounding (Einstein’s 8th wonder of the world!). Remember to only invest what you can afford to lose.
- Don’t forget about your life insurance and will: Nobody likes thinking about this gruesome twosome, but it’s crucial you don’t neglect your life insurance and will – especially if you have dependents. Your life’s circumstances may change year to year, which should be reflected in your will and life insurance plan.
- Start talking about money: The topic feels awkward, emotionally charged and complex. But even if it makes us uncomfortable it is important you find someone to accompany you through this journey, because no one should face the overwhelming task of financial management on their own.
- Be honest and seek advice: If upon completing your annual financial check-up you find yourself feeling disappointed but are also ready to pay the fee, don’t be afraid to seek professional advice.
Disclaimer: We are not certified financial advisers! This article is provided for information and educational purposes only and do not constitute financial advice. You are advised to consult with an independent financial advisor for advice on your specific circumstances.
About the author
Emilie Bellet is the founder of Vestpod: the newsletter that makes you feel good about money. We want to empower one million women financially by providing 24/7 access to independent, unbiased and up-to-date guidance regarding all financial aspects in life. You can register for our free weekly newsletter here.