No matter how much money you have, you probably feel like you could use some more, especially after the dumpster fire that was 2020. But knowing you want more money and knowing how to get it are two very different things. If you’d like to turn those idle hopes into an actionable plan this year, follow the steps below.
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1. Create a budget and stick to it
A budget is an essential tool for keeping your spending in line and increasing how much you save for your personal goals. Budgets can feel restrictive, but they don’t have to be. It’s actually a good idea to bookmark some money for activities you enjoy because doing so makes it more likely you’ll stick to your budget.
The first step to creating a sound budget is to record all your essential expenses. Monthly bills are easy enough to figure out, but look back through your last year of bank and credit card statements for quarterly or annual payments you have coming up again. Note these down as well. Then, make a list of your savings goals and the deadlines for these goals. This will help you figure out how much you must save per month.
Subtract each of these expenses from your monthly income, starting with your essential costs. If you’re unable to pay all your bills with your current income, consider reducing your nonessential spending, checking out financial assistance programs, or starting a side hustle (we’ll get into that in more detail below).
If keeping up with your budget sounds like a bore, get a budgeting app that will track it for you. This will save you some math and give you feedback on how you’re doing. You may also be able to set up automated bill pay and savings transfers from your bank account to save you even more time.
2. Establish (or rebuild) your emergency fund
If you don’t already have an emergency fund or if you’ve depleted yours during the pandemic, building it back up should be your top financial goal. It’s up to you to decide how much you’d like to keep there, but you should try to have at least three months of living expenses saved, and more if you’d like an extra cushion. If you have a high-deductible health insurance plan, you should also make sure your emergency fund has at least enough to cover your deductible, unless you’re saving for that in a health savings account.
Start saving regularly in a high-yield savings account once you know how much you need. It’s a bad idea to invest your emergency fund because you never know when you’ll need it. You could be forced to sell your investments at a bad time and end up costing yourself money.
Remember to replenish your emergency fund every time you dip into it so you’re ready for the next emergency. And recalculate your emergency fund every year or every time you experience a major life change, like starting a new job or the birth of a child, to ensure you always have enough saved.
3. Start a side hustle
Whether you have a steady job or not, a side hustle is a great way to bring in some extra cash, develop new skills and contacts, and possibly turn one of your hobbies into a business all your own. If you’re concerned about the pandemic, look into side hustles you can do from home. There are plenty of opportunities online these days, especially for those who are tech-savvy.
You can decide how much you want to work and how much to charge for your services, but it’s best to stick to a regular schedule and keep your prices reasonable based on your experience level and what the competition is charging.
Don’t forget to set aside a portion of your side hustle earnings for the government, or you could get a surprise at tax time. If you’re not sure how much you need to save, you can use this IRS tax form to help you figure out how much you will owe.
While it may be more fun to gamble on a lottery ticket, your most likely road to wealth involves careful planning, hard work, and responsible money management. The tips above can get you moving in the right direction, but don’t stop there. Be on the lookout for ways to save on your current expenses, work on paying off any debt you already have, and check in with yourself every few months or so to make sure you’re sticking to your financial plan.
View more information: https://www.fool.com/the-ascent/banks/articles/these-3-tips-will-help-you-grow-your-wealth-in-2021/