With the approaching new year, we always try to set helpful objectives that will help us become better people. However, before you set your financial objectives, you need to analyze your previous year to see how well you did. Even though the year has ended, you can still learn a thing or two from it that will help you in the future.
When analyzing your spending habits, you need to find clear objectives for your expenses. If you find that your budget lacks any clear categories, then you were a victim of unplanned spending, which can be a budget buster. You will find that most of your expenses consist of very small transactions that are periodically repeated. Since those transactions are very small, you don’t really pay attention to them, but as they are repeated, they start affecting your budget.
On the other hand, if you find that all of your expenses fall within clear categories, then you are a focused spender.
You are supposed to save 20% of your monthly income and put it in a savings account.
Traditionally, you are supposed to save 20% of your monthly income and put it in a savings account. Or if you don’t need your savings in the near future, then you could invest the money so that it yields better interest. If you don’t have debt or if you don’t pay rent, then you should be able to save 50% of your monthly income. However, every person’s budget differs. For example, if you have a family to support, you might find yourself unable to commit to the 20% rule.
You have to analyze your savings from the previous year and see how that money was used. Was it invested? Did you put it in a savings account? Or is it in cash in your home doing nothing? The best thing you can do is to let your savings work for you through investing them. This is called passive income.
In conclusion, through analyzing your previous year, you are able to set realistic financial goals that can help you achieve a more successful new year.