A cash cushion, or emergency fund, serves as a foundational component to any well designed…
Wondering how to improve your finances in 2020?
The holiday season can be stressful as we think about what to get everyone else. From gifts, to party favors and hosting, the costs add up quickly.
What about giving a little Christmas cleanup to our own personal finances?
Getting our finances in order is usually met with with the same hurdles and excuses:
- I don’t have enough time
- I’ll get to it later
- I don’t know where to start
Well, we know there is no time like the present (pun intended), later usually never comes, and I have some tips on where to get started:
Cash flow represents arguably the single most important aspect of obtaining financial peace of mind.
Having more money coming in than going out will always be a recipe for success.
Unfortunately, with all of our competing priorities and bills, obtaining this excess can be difficult. This is especially true because most people have a reactive cash flow system.
A reactive system is where the deposit from each paycheck hits the checking account where it sits until used to put out fires and pay expenses.
Savvy savers slowly start to see that checking account grow. Then, maybe they send a little cash to their investment account. Maybe a little cash to a college plan. Maybe a little extra cash to pay down their student loans.
It’s a very manual process that leaves us asking the question, “Am I on track?”
A top action to improve finances for 2020 should be to identify your financial goals and develop an automated system to start funneling money to the appropriate buckets to support those goals.
Many of the largest financial decisions we make involve utilizing other people’s money, or “credit”.
- Buying a car
- Buying a home
- Starting a business
Handling credit effectively can be one of the most impactful actions to your personal bottom line. Ensure you obtain the best rates possible for these large purchases by taking steps to improve your credit score. The improvements in your interest rate from an improved credit score could easily add up to thousands of dollars in savings!
A top action to improve finances for 2020 should be to understand which factors go into your credit score and to work on increasing that score as much as possible.
We can’t get very far investing without excess cash flow to add to our investments, so don’t overlook developing that cash flow strategy mentioned above!
With excess cash flowing to support your goals, investing effectively to grow that money becomes critical.
In addition to an increased opportunity to reach your goals more quickly, investing will also help you outpace inflation.
Remember all of those times grandpa told you about riding the train for a nickel? Inflation is the sneaky arch-nemesis of our money. The classic example of death by a thousand cuts.
A top action to improve finances for 2020 should be to develop a proper investment strategy to meet your personal goals, which will help you outpace inflation and get your money working for you.
Make 2020 the year you improve your finances
Developing a cash flow system, improving your credit, and investing appropriately will help develop an excellent foundation for you to continue to build upon year over year.
If you’d benefit from step by step guidance on developing this critical foundation, including all of the tactics highlighted above, be sure to check out our cost-effective online course, Developing Your Foundation to Financial Freedom.