It's 2023 and some of the financial strategies you implemented last year that did not bear fruit need to re-evaluated.
The good thing about the start of a new year is that most people have this new-found energy to start afresh. This attitude and energy can be harnessed into one's personal finance as well.
Think of it as a chance to assess and adjust what needs to be adjusted in order to reach your personal financial goals.
Despite the thousands of little nuggets of financial wisdom you are likely to come across, there are the basic fundamentals that never change.
These basic tenets act like the foundation upon which one can then build, create and/or generate wealth and get to enjoy the benefits of having a healthy financial life.
Some of these basic fundamentals include; how we handle debt, how we save, how we invest, how we budget and how we spend.
With this in mind, here's a look at 8 financial rules to live by in the new year.
This means that you should not spend more money than you actually have or earn. It is important to budget your finances and make sure that you are not overspending or taking on too much debt.
One way to do this is to create a budget plan that outlines your income and expenses, and make sure that you are spending less money than you are bringing in.
This can help you save money and avoid financial stress in the long run.
Read Also: 9 Money Rules You Should Live By
One important financial habit that can help you achieve your financial goals is to save a portion of your income regularly. This means setting aside a certain amount of money from each paycheck or monthly income and putting it into a savings account or investment account.
This can help you build up a financial cushion for emergencies, invest in your future, and reach your financial goals faster.
Here are some tips for saving a portion of your income regularly:
Determine your financial goals: Before you start saving, it’s important to know what you’re saving for. Do you want to save for a down payment on a house, fund your retirement, or have a financial cushion for emergencies? Having a clear goal in mind will help you determine how much you need to save and how often you should save.
Set a savings goal: Once you have your financial goals in mind, determine how much you need to save in order to achieve them. For example, if you want to save Ksh120,000 for a trip to the middle east in December, you’ll need to save about Ksh10,000 per month.
Make a budget: In order to save a portion of your income regularly, you’ll need to make a budget that includes your savings goals. Look at your income and expenses and see where you can cut back in order to free up money for saving.
Automate your savings: One way to make sure you save a portion of your income regularly is to set up automatic transfers from your checking account to your savings account. This way, you won’t have to remember to manually transfer money each month.
Review your progress: It’s important to regularly review your savings goals and progress to make sure you’re on track to achieve your financial goals. If you find that you’re not saving as much as you’d like, you may need to adjust your budget or find ways to increase your income in order to meet your savings goals.
Read Also: How to Save More Money Faster in 2023
High-interest debt can quickly accumulate and become overwhelming, so it is important to prioritize paying it off as soon as possible. By doing so, you can save a significant amount of money in the long run by avoiding paying high interest rates on your debt. Some strategies to consider when paying off high-interest debt include:
Pay off the highest interest rate debt first: Focus on paying off the debt with the highest interest rate first, as it will cost you the most in the long run.
Negotiate with creditors: If you are struggling to make your payments, reach out to your creditors to see if they are willing to lower your interest rate or negotiate a payment plan.
Use extra money to pay off debt: If you receive a bonus, consider using that money to pay off your high-interest debt.
Use the snowball method: Start by paying off the smallest debt first and work your way up to the larger ones. This can help give you a sense of accomplishment and motivate you to continue paying off your debt.
This is important because it helps individuals allocate their money towards their priorities and avoid overspending or going into debt.
A budget also helps individuals track their spending and identify areas where they can cut back or save money. Additionally, it can help you plan for the future by setting aside money for emergencies or long-term goals such as retirement or buying a house.
Overall, creating a budget and sticking to it is a key step towards financial stability and security.
Read Also: The 30-30-30-10 Budget of January & Beyond
Making a plan for your financial future is important because it helps you set goals, prioritize your spending and saving, and stay on track financially.
Without a plan, you may find yourself living paycheck to paycheck, unable to afford unexpected expenses or save for long-term goals like retirement.
A financial plan can also help you make informed decisions about investing, budgeting, and managing debt. By taking the time to create a plan, you can better prepare for your financial future and work towards financial stability and security.
Read Also: Money Hack: Make Your 2023 Spending Plan
An emergency fund is a dedicated savings account that is used to cover unexpected expenses that may arise. These can include things like medical bills, car repairs, or home repairs. It is important to have an emergency fund because it can help to prevent you from having to go into debt to cover these unexpected expenses.
To start building an emergency fund, it is important to set aside a small amount of money each month. This can be as little as Ksh500 to Ksh5,000, depending on your budget and financial situation. As your emergency fund grows, you can increase the amount you set aside each month.
It is also important to keep your emergency fund in a separate account, such as a high-yield savings account, to make it easier to access when you need it. This will also help you to avoid the temptation to spend the money on non-emergency expenses.
In addition to building an emergency fund, it is also important to have a plan in place for how you will use the money. For example, you may want to prioritize paying for necessary expenses first, such as medical bills or home repairs, before using the money for less essential expenses.
Overall, having an emergency fund is an important step in financial planning and can help to provide peace of mind in case of unexpected expenses.
Investing wisely involves taking the time to research and understand the various investment options available, including stocks, bonds, mutual funds, real estate, and that biashara you've always wanted to start etc. It also involves setting clear financial goals and choosing investments that align with those goals, such as saving for retirement or building wealth for the future.
Additionally, it is important to diversify your investment portfolio, meaning that you should not put all of your money into one investment. Instead, spread your investments across different asset classes to reduce risk and increase the potential for returns.
Another key aspect of wise investing is managing risk, which involves understanding the potential risks associated with different investments and making informed decisions based on this knowledge. This may involve investing in lower-risk options, such as bond funds, or choosing investments with strong track records of stability and growth.
Finally, it is important to monitor your investments regularly and make adjustments as needed. This may involve reevaluating your financial goals, rebalancing your portfolio, or selling off investments that are not performing well. By investing wisely, you can maximize your chances of achieving your financial goals and building a secure financial future.
Read Also: Investing for Beginners: How to Get Started
It's important to think carefully before making any financial decisions, especially if they are impulsive or spontaneous. Impulsive decisions can often lead to regret or financial problems in the future. Here are some tips for avoiding impulsive financial decisions:
Take a step back and think about the consequences: Before making any financial decision, consider how it will impact your long-term financial goals and stability. Will it bring you closer to your goals or further away?
Don't act on emotions: If you're feeling overwhelmed or stressed, it's important to take a break and calm down before making any financial decisions. Emotions can cloud your judgment and lead you to make impulsive decisions that you'll regret later.
Seek advice: If you're unsure about a financial decision, it can be helpful to seek advice from a trusted financial advisor or professional. They can provide objective advice and help you make a more informed decision.
Sleep on it: If you're still unsure about a financial decision, give yourself some time to think it over. Sleep on it and see how you feel in the morning. This can help you make a more rational and thought-out decision.
By following these tips, you can avoid making impulsive financial decisions that could lead to regret or financial problems down the road.
It would be wise to also make 2023 the year in which you are continuously educating yourself about financial management as this is guaranteed to improve your decision making process.
It is essential for long-term financial success. This includes learning about budgeting, investing, debt management, and retirement planning.
It also involves staying up-to-date on changes in financial laws and regulations, as well as keeping track of your own financial situation and making adjustments as needed. This can involve seeking out financial education resources such as books, online courses, or consulting with a financial advisor.
It is important to continuously educate yourself in order to make informed decisions about your finances and achieve your financial goals.