Are you still thinking of planning your finances? Why not make investment decisions, which can change your life completely? If your goal is to achieve financial freedom or wish to get out of debt, making the right decisions is essential.
So, let’s learn about some of the key financial decisions, which can help you achieve financial freedom much faster than anyone else. Of course, correct steps taken on time can help in reaching your long-term investment plans earlier.
Important Financial Decisions to Make
Let’s have a look at a few financial resolutions to keep in mind:
1. Set a Realistic Financial Goal
The first thing you should do is that you must set a realistic financial goal. Now, what’s that? Consider your current position and earnings along with your weekly, monthly, and yearly expenditure to set an objective that can be attainable.
Financial goals can be both short-term and long-term. But it must follow specific guidelines, also known as SMART, where S stands for specific, M is for measurable, A for achievable, R stands for relevant, and finally, T is for time-bound. You should follow these SMART guidelines for crafting your perfect and realistic targets.
It is better to create a budget before finalizing your financial goal. Finally, remember that your goal should be traceable, and you can alter it as per your situation.
2. Find a Passive Income
Passive income can be a great way to build wealth and pay off your debts faster. Passive income is one where you can generate recurring revenue, and there are several ways to do so.
Making YouTube videos, creating your blog, renting out your extra room or property as Airbnb, investing in stocks, real estate, etc., all generate passive income for the short or long term.
To generate passive income, you need to be creating something of value. And that’s all! It doesn’t require a large investment or anything. Even if you succeed in getting a few bucks as a passive income every month, it will add up and become a means for you to become financially successful at a very young age.
3. Build an Emergency Fund
Emergencies such as health or education-related, or any such thing can make all your financial goals and plan vulnerable. Therefore, it is crucial to building an emergency fund beforehand. An emergency fund ensures that you don’t have to cut other daily expenses in a dire situation.
If you don’t maintain an emergency fund, then it increases the chance of accumulating debts. You must have an emergency fund that can cover 3 to 6 months of your living expenses. If you have not started saving money for it yet, then build a habit of doing that.
4. Cut Your Spending
To begin, avoid outside food as much as possible. Try to make your meals at home, it is not only healthy, but it can also help you in the financial decision-making process. Preparing meals at home can be hard sometimes, but believe it or not, it can help you decrease your spending exponentially.
Right now, people are working from home due to COVID 19 situation, so try to eat home-cooked meals and avoid food apps as much as possible, and you can feel the difference in your spending at the end of the month. Cut down your shopping bills and other unnecessary items those can be deferred. Focus only on essential goods and not luxuries.
5. Pay off All Credit Card Bills
The usage of credit cards can be tempting for many. But do you know that your credit utilization with your payment history can drastically impact your credit score? The less you utilize your credit card, the better your credit score will become.
A great way to maintain your credit score is to limit your credit card utilization to less than 30 percent. If you don’t, then your credit score will decrease.
If your credit score gets low, it gets difficult to get any loan from banks or financial institutions. Repairing the credit score also takes a lot of time and can become harder. Make sure to pay off your entire credit card bill each month.
So, these are the most important financial decisions you can take in 2021. Look for intelligent ways to gain financial freedom and pay off all your existing debts. Some decisions may seem easy, and others a bit difficult. Like good financial decisions prove handy for stock traders experiencing a bullish or bearish market. Similarly, even if you are a newbie, choosing a sensible alternative can do wonders.
Whatever resolution you take for this year, remember that no financial decision and goal is impossible to accomplish. It doesn’t matter how long you take. All that matters is that you start.