The beginning of a New Year! It’s that time of year when we reflect on the past year and plan for the upcoming year. Good tidings fill the air and resolutions abound! With this in mind, we have put together a list of five financial resolutions that you may find useful.
Spend Less Than You Earn/Own
This is a good rule of thumb and while it sounds obvious, many people rely on debt (e.g. credit cards) to support normal living expenses. While at times this may be necessary, perhaps following a job loss or other unexpected situations, it is not a sustainable formula for everyday living, and if unchecked, it can become financially crippling. In such situations, a useful solution is to consolidate debt in order to reduce overall expenditure. This is especially true if some of the debt is revolving, like credit card debt. Another method to help you spend less than you earn is to trim or reduce unnecessary expenses. Alternatively if expenditure cannot be reduced, then perhaps income can be increased by finding another (part time) job or turning a skill or hobby into a money making opportunity.
Sock Some Away for a Rainy Day
“Make hay while the sun shines” is a popular refrain because it's not always sunny. Try to put aside some money for those “rainy days”. This does not have to be large sums of money. You can save small amounts, and over time, they will accumulate and be used to finance something specific. A good example is car insurance payments, which in total can be expensive, and you might be required to paid the total all at once. However if you divide your annual premium into monthly payments and save this amount each month, then you will be able to easily make the annual payment when it is due.
“Happy New Year from all of us at Carilend!”
Don’t Just Save, Invest
While saving is a very good discipline, real wealth creation and growth comes from investing. There is a common misconception that investment involves or requires large sums of money. However, small, consistent and well invested amounts can overtime yield good returns. For example as a Lender via our Peer to Peer lending site, you can invest smaller sums and still earn a favourable return.
Budgets are Important
Like in most cases, a good plan improves the chances of success. A budget helps you to plan out your income and expenses. Setting it out on paper creates a visual image and allows you to take a look at the bigger picture. This way you can plan for expenditures, determine what expenses may be unnecessary and determine whether any other actions need to be taken, such as consolidating your debt. Budgeting also helps determine what surplus is available for saving or investing.
Use Debt Wisely
Debt is often a necessity, especially when acquiring large and costly assets like property, a vehicle or photovoltaic solar systems. The funds may not be readily available to purchase these assets, and in some cases, there may even be tax benefits for borrowing.
Due to the fact that debt is readily available these days, the temptation to borrow for things we want rather than for things we need can be quite strong. If there is income to support the monthly payments, then this type of borrowing is fine, but if not, this can spiral out of control if too much debt is obtained.
On the other hand, a good use of debt is for an investment, such as the purchase of an asset, which can be used to generate income continuously. The idea is to purchase the asset when employment income is available and repay it before retirement so that the income can assist in sustaining your lifestyle post retirement.
As you consider your resolutions for 2017, you may wish to consider some of these financial ones. We hope that they will assist you in achieving your financial goals.
Happy New Year from all of us at Carilend!