5 tips for planning and managing money in the new year

Creating a budget requires tracking of cash flows over a period of a month.

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The beginning of the new year is the most appropriate time to collect all banking and credit card data, in addition to sources of income and spending, to establish a baseline of income and expenditures, for the purpose of planning and setting financial goals.

Here are the most important tips in this regard:

Setting goals

One of the important lessons we learned in 2020 is that it is not possible to predict what the future holds for us on more than one level, but having a set of clear and flexible goals to work towards achieving them can provide a great deal of organization and preparation in troubled times, and achieving them is not related to taking a group Not only decisions, they change behaviors, and most importantly, build healthy financial habits.

The key to achieving decisions is for the individual to be specific about his financial goals, as it is often difficult to measure success in case the goals are vague and unclear. Instead of setting general goals, such as: “Get rid of debts and start saving”, make a decision such as: “Getting rid of Pay the accumulated payments to a card », and once you have a list of decisions for the new year, it is important to separate it into short-term goals and long-term goals.

In doing so, realistic timelines can be set for achieving them.

Create a budget

Once you have chosen financial goals for the new year, you will need to create a budget that will help achieve them, and this step can be accomplished by tracking cash flows over a period of a month, and this means taking notes about all income and expenditure flows and comparing them, to see if there is a profit or loss. At the end of each month.

Next, we need to categorize expenses on the basis of variable or fixed costs.While fixed costs are difficult to adjust, and include expenses, such as rent or utility bills, variable costs are more flexible, such as groceries, dining out, and any entertainment subscriptions. .

Then, by using the expected savings that an individual will gain from reducing these variable costs, it is possible to determine a certain amount of money for the savings each month.

As for maintaining a realistic budget, this requires ensuring that its performance is reviewed regularly, and adjustments are made when necessary.

Saving Money

Learn how to save money, which helps in budgeting more effectively, and there are many tips that can be started to be implemented to reach your savings goals, by reducing your weekly spending in the grocery, which means planning your weekly meals in advance, creating a specific shopping list, and not Exit it once you enter the store.

It is also possible to reduce the utility bill, as well as review the costs of subscribing to some packages, take advantage of promotional offers, or choose one day a month or more as a day "without spending" for a period of 24 hours.

With a budget planner, it is possible to include the total income and add up all the expenses, including the costs of paying off any debts, such as credit cards or loans. That way, we will know exactly how much we have left.

Debt management

The new year may be an appropriate opportunity to review debts in order to fully manage them, and this may be the most important financial decision for the year 2021, and for debt management, a list of all obligations must be drawn up and organized according to annual interest rates, as debts at interest rates should be paid first.

There is a way to get rid of debt, which is to use the 50/30/20 budget rule, which is based on allocating 50% of income to all needs, i.e. fixed costs, such as rent and utility bills, and 30% for variable costs, compared to 20% going to savings. That is, pay off any outstanding debts, create an emergency fund, and again flexibility is the key. If 20% of the income is insufficient to cover basic debt payments, the individual will need to adjust his fixed and variable expenses to increase his total debt contributions.

Emergency funds

To ensure that financial plans are not affected by unforeseen future circumstances, and will always be effective throughout their period of validity, top priority should be given to an emergency fund.

The emergency fund is known as the account allocated for money for large unexpected expenses, without the individual having to rely on credit cards or bank loans with high interest, and the individual must have what is sufficient to cover living expenses from three to six months, by starting with setting the goal of monthly savings, and the possibility of Consider a mechanism to reduce some categories of spending and transfer them to the fund in the absence of sufficient funds, taking into account that gifts of holidays and events, as well as holidays, do not fall under the category of "emergencies".

The budget rule (50/30/20) is one of the ways to get rid of debt.

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