2020 has been a tough year. Millions of consumers have been plunged into financial difficulties by a pandemic that arrived with no warning. Quarantines led to layoffs and temporary closures. In some cases, businesses closed permanently, and salaries disappeared overnight. We’ve lived through no better example of how important it is to save for emergencies, and this tops our list of six best pieces of money advice you should follow.
1. Save for Emergencies
As has become painfully obvious, one never knows what will happen. Today, it’s a pandemic, but more than global emergencies can topple your monthly budget. Saving for emergencies must be a priority. If possible, build up to an equivalent of six months’ expenses. But don’t let this goal discourage you.
- Commit to a monthly amount and plug it into your budget.
- Use fintech products to transfer money to your emergency savings fund automatically.
- If your salary is by direct deposit, designate a portion to be transferred to your savings account.
- When shopping with cash, save all the change. Collect it in a jar, and once a month, deposit all the money into your emergency savings account.
Your emergency savings are liquid funds, ready to help you out when you need them. You won’t have to go into debt by using your credit cards or taking out a high-interest loan to get you through the emergency.
2. Track Your Money
You’ll never be able to put your money to work for you if you don’t know where it’s going. Thousands of people are living paycheck-to-paycheck. When the end of the month arrives, they’re out of money, and they don’t know why.
A new year is starting, and it’s an excellent time to implement a money-tracking strategy. You might be surprised how much waste there is in your monthly cash flow. There are many fintech products on the market today that help you budget and track your money.
3. Reduce Expenses
It may be a given, but one of the best pieces of money advice you should follow is to reduce your expenses. Are your service providers still a good value? Are you getting the full benefit from your subscription packages? Don’t be shy about shopping around.
Audit your monthly bills, such as mobile, internet, and utilities. You might find many hidden charges. Are they legit? If not, dispute them. If you’re paying for things you don’t need, change your plan or provider.
Every dollar that you can save is a dollar that you can put into your emergency savings account.
4. Get Rid of Credit Card Debt
Paying the minimum due each month on high-interest credit cards will keep you in debt for years. Do everything possible to pay off your credit card balance in full each month. You’ll have money to pay yourself—to save for retirement, vacations, emergencies, go back to school, maybe launch a new business.
5. Live on a Modest Budget
One big mistake many people make is they use salary increases to buy more expensive things. It’s known as lifestyle creep. Before you know it, your expenses will wipe out whatever you gain from your better salary. Live a little below your means. And watch out for the FOMO factor.
As your income grows and you meet your financial goals, start investing. Visit a financial planner and decide upon an investment strategy to help you realize your long-term financial goals.
6. Check Your Credit Report
Whether you intend to apply for credit or not, you should routinely check your credit report. Erroneous information on your credit report could hurt you. Fixing errors could boost your credit score. Reviewing your credit history will alert you to any instances of identity theft or other cases of cybercrime.
This year is on its way out the door. If you can implement these six pieces of money advice, you’ll maximize your financial success in 2021.