2020 is drawing to a close and aside from being globally eventful, it has also provided many lessons for anyone who has been paying attention.
Here are a few financial lessons to enter the new year with:
1. How you invest matters
Investing is a sure-fire way to achieve your financial goals sooner, but what should you invest in? 2020 has been a unique opportunity to see how an unforeseen event can suddenly cripple certain industries whereas others are thriving. The lesson to be learned here is that a diversified investment portfolio should be your top priority. Investing in multiple assets and asset classes will protect your capital in case some assets underperform.
2. Have a rainy day fund
If 2020 has taught us anything, it should be that life is unpredictable and you should always have rainy day savings to weather you through such volatility. Experts recommend having at least three or four months of liquidity. This means that you should be able to manage your expenses comfortably for at least three months in case of an unforeseen event using these funds. The money can also be used for financial emergencies. Remember to replenish the fund every time you have to dip into it.
3. Live below your means
Your lifestyle should be supported by your income comfortably. If it’s not, then you are probably spending much more than you should be, and you need to curb that extra spending. Examine your monthly expenditure and separate the things you truly need from luxuries and eliminate them until you can afford them. Budgeting will help you understand your financial limits and therefore give you more control over your spending.
4. Managing debt is crucial
You should make clearing debt a priority because the longer you have it, the more you end up having to pay thanks to interest and other charges. Striving for early payment will save you money in the long run. On top of that, being debt-free gives you financial flexibility, allowing you to achieve your goals. To make repayment a little less daunting, create a plan that consolidates the amount you owe and schedule regular payments. This will enable you to clear it quickly and manageably.
5. Develop skills to improve your income
One of the ways to achieve financial freedom is diversifying your income streams, which can easily be done by improving your skill set. You can learn new skills by going back to school, taking online classes, asking for additional training or tasks at work, or finding a mentor.
The ending year is an opportunity to take stock of your financial situation and set new goals for the coming one. Learn what you can from it and strive to do better in the next twelve months.
To speak to a financial advisor about your investment needs for 2021, contact email@example.com.