2017 is fading out already and most people are taking stock of how the year went by, in order to make better preparations for 2018. If you are like most folks, you’ll most likely be thinking about making New Year resolutions such as actually using your gym membership or adopting a more frugal lifestyle. Some folks might also be thinking about how they can make smarter financial decisions in the New Year. This piece provides insight into 5 personal finance tips that can get your finances on the fast track in 2018.
- Start with being accountable
You are in charge of your financial destiny and you should be ready to take responsibility for the financial actions within your control. Being accountable in 2018 begins with your ability to account for every dime you spend. Many people blow through their paychecks every month without being able to say exactly how they spend their money each month. You can start by creating a budget, which could be very instrumental in helping you to be in charge of your finances.
- Bring your financial goals alive by writing them down
Your financial goals are nothing more than dreams until you expend the effort of writing them down. Financial goals include getting out of debt, saving up for a down payment, putting more money in your retirement account, or saving up for your kids’ college education. Writing down a dream turns it into a goal – the act of writing it down forces you to think about the steps that you need to take to achieve the goal.
- Know your risk tolerance before you invest
Investing your money is probably the fastest way to grow your wealth, because savings accounts don’t seem to yield reasonable interest these days. However, before you invest, you need to know the difference between speculative and conservative assets. Knowing your risk tolerance can help you put your money in assets that will deliver the best returns without taking you through undue anxiety. Leland Barrett, an analyst at Olsson Capital observes that, “you can typically expect low risk investments to yield low returns while high risk investments tends to deliver a relatively higher return”.
- Diversify your investments
All types of investments have a latent amount of risk; a zero-risk investment is most likely a scam in which you will lose money. However, you need to protect your downside to ensure that your portfolio is not exposed to too much risk on any one asset. You should ideally have a mix of assets that protect you from market downturns, socioeconomic problems, and political upheaval. Hence, you may want to consider keeping a portion of your wealth in equities, real estate, precious metals, and foreign currency.
- Know your assets and liabilities
Taking stock of your assets and liabilities is an important process of getting your finances in order for 2018. Your assets are simply the things you own or stuff that brings money into your pocket while your liabilities are things that you owe, which takes money out of your pocket. Taking stock of your assets can help you calculate your net worth, which is what is left over when we subtract your liabilities from your assets.
