Updated for 2020!
In the new year, a lot of people will make resolutions (regarding their personal finances, health, relationships, and more) to do new things or do some old things differently.
The statistics are not great on the percentage that will actually follow through with their new year resolutions (8% success rate according to Forbes). Even if most new year resolutions fail, I’m optimistic you can make positive and incremental changes to your life this year 😉
Here are a few smart personal finance tips to improve your finances this year:
Set Financial Goals and Make a Budget
It may sound simple, but this is the starting point if you want financial success. Take a close look at your income and expenses. This will give you a picture of where your finances are at. Set specific financial goals for the short, medium, and long term, and start working towards reaching those goals one after the other.
Track your spending using free apps like Mint, KOHO, or just use a simple spreadsheet. Have a monthly budget – nothing complicated, keep it simple! Your budget is the key to meeting your goals.
If you fail to plan, you are planning to fail. – Benjamin Franklin
Automate Your Savings and Investing
After budgeting and documenting your savings/investing goals, it is time to make it happen automatically. Set up your savings/investing accounts to automatically withdraw funds from your chequing account i.e. pre-authorised deposits. The chances of you following through with your savings/investing plans are significantly increased with this approach.
Some options for high-interest savings: Open a Tangerine Savings Account here (Canada) and earn 3% on your account for the first 6 months. If you are in the United States, check out the following online-only banks for some of the best high-interest savings available: Discover Bank, Ally, and Synchrony.
Automate Your Bill Payments
As with your savings and investing, consider automating your bill payments. This will help to pay your bills on time and avoid late-payment fees that can derail your savings efforts this year. Paying your bills on time will also ensure you do not damage your credit score.
Don’t get used to paying the “sticker price.” And, this is not only for high-priced purchases like a car. Get used to doing comparison-shopping and look around for the best deals – including on groceries, car and home insurance, mortgage rates, etc.
Comparing prices and checking out reviews have never been easier to do, and you’ll be surprised how much you can save by deploying this simple strategy. The cost-savings will add to your bottom line by lowering your expenses. Make sure to earn cash back when you shop!
Pay Off High-Interest Debt
Paying just the minimum amount does not cut it with credit card debt – it’s like digging yourself into a bottomless hole. With the high-interest rates charged on credit card debt, you should be paying it off first before trying to save or invest. When your credit card debt is defeated, you will have more funds to put towards boosting your finances.
The Empower app can help you pay off your credit card debt and cut your interest payments.
Start a Side Gig
While you can try cutting down your expenses, you can only go so far. Another strategy for increasing your savings and improving your finances is to increase your income by starting a side business(es) and increasing your sources of income. Get out of your comfort zone and engage your entrepreneurial abilities this year.
There are many legit side gigs you can use to generate extra income. Check out these 35 top paid survey sites that you can use to make an extra $200 per month from the comfort of your home.
Knowledge is power. To boost your finances, you need to be financially literate and understand how money works. And, not just financial literature – read widely, and you will be the better for it. Educating yourself may also include learning new skills that increase your earning power.
Some books you can add to your financial reading for the year include:
- Against the Gods: The Remarkable Story of Risk by Peter Bernstein
The Little Book of Common Sense Investing by John Bogle
- The Wealthy Barber Returns by David Chilton
An investment in knowledge pays the best interest. – Benjamin Franklin
Check Your Investments
Don’t just forget about your investments, check-in once in a while. If you are a passive index investor, you may need to re-balance your portfolio once or twice every year to ensure your asset allocations are still intact. You should also be renewing your investments for fees. Minimizing the fees you are paying for the management of your investment can significantly increase your returns.
DIY investors can save money by buying ETFs on commission-free brokerages like Questrade (+$50 in free trades with this link). If you would invest on autopilot while saving on fees and maximizing your returns, consider using the services of a robo-advisor.
Ask For More
Yes, become an “Oliver Twist,” and ask for more!
To start, ask for more from yourself – you can probably do better in many facets of your life. Start small; like they say: “Rome was not built in a day.”
And, if you are already doing more, consider asking your boss for more (if you believe you deserve it). Negotiating your salary can be a smart move if you are an asset. I came to understand the power of “asking” a few years ago when I got a $10,000 plus salary raise after I asked for a promotion at the conclusion of a 6 months anniversary performance review!
You can also “ask for more” by simply offering your skills to another company that better appreciates your talents and is willing to pay you more.
Review Your Bank Statements Regularly
In a world where fraudsters are just a click away, it’s important to check your bank statements for any odd activity. At the same time, this will give you a good idea of where your money is going, and if you need to make adjustments. As an aside, you may also note that useless magazine subscription that you need to call and cancel …again!
Work on Your Credit Score
Good credit history and a high credit score mean you can access credit at much lower interest rates. Check your credit score routinely not only to see where you are at but also to detect any fraudulent activity, including identity theft. You can now check your credit score and report for free in Canada. For the U.S., Credit Karma provides a free credit score, report, and credit monitoring.
Talk About Money
Discuss finances with your spouse and children. It will be easier to achieve your financial aspirations when everyone in the family is on the same page with regard to financial goals, budgets, and plans. Look for opportunities to talk about money and where you stand as a family. Talk about it at the dinner table, as you drive around town… whenever you have a chance. When you are in a good place financially, the entire family benefits.
Stop Living to Impress Others
If you want to “keep up with the Joneses”, you had better be able to afford it and be willing to live with the additional stress it will bring. While you should aim to do well for yourself and be a responsible member of society, you still want to live within your means.
We buy things we don’t need with money we don’t have to impress people we don’t like. – Dave Ramsey
Don’t Pinch Pennies While Losing $$$
I’m all for frugal living, but its gotta make sense. I will shop at the dollar store etc. for some items and ensure I get them as cheap as cheap can be. I won’t go into specifics, however, for some other items, I would rather buy expensive aka good quality aka safe aka peace of mind…
The question is – are you saving pennies today only to lose $$$ tomorrow or in the long run?
Don’t Wait to Win the Lottery
Yes, don’t hope and wait for a lottery win to solve all your financial troubles. The odds are against you in that department, and it will likely never happen. Don’t bank on luck. Plan – plan – and do something about your plans. You can turn your finances around for the better if you set your heart on it.
A can-do attitude will do you a lot of good in 2020.
Happy New Year!!