In this article, I share 10 financial resolutions for 2021.
The beginning of January is the time when everyone adopts good resolutions for the coming year: eat healthier, exercise more and stop smoking are some of the most popular ones.
However, very few people think about their finances. This is curious because money dominates almost every aspect of our lives.
Developing good financial habits is crucial for sleeping well at night and reaching our life goals.
Here are my 10 financial resolutions for 2021. I hope they inspire you to adopt similar goals and start your investment journey.
1 – Make a Monthly Budget
Consistent budgeting is the cornerstone of all financial planning.
To track my spending, I commit to making a budget at the beginning of each month. The easiest way to get started is to create an Excel spreadsheed and put my income on the left hand column and my expenses on the right hand column.
As the month goes by, I track my expenses by recording every expense in this chart.
At the end of the month, I add everything up to get my spending total for that month.
At first, this is a bit time consuming but it gets easier as it becomes a habit. I’ve learned the hard way that it’s practically impossible to get your finances on track if you don’t make some form of budget.
If you need help getting started, check out Solaya Rabble’s very comprehensive guide on How to Budget. It’s packed with valuable advice and the personal hacks she uses to stay on top of her finances.
2 – Spend Less Than I Earn
Making a budget is a wakeup call as to your spending habits. Buying things is nice, but becoming financially independent requires spending less that you earn. For a long time (years in fact) I spent recklessly; I never kept track of my spending and I was regularly in overdraft.
Finally, I decided that enough was enough.
Over the past 2 years, I have developed the skill of financial planning and budgeting. I fixed myself the objective of never going into overdraft again. This required reducing my lifestyle, which wasn’t easy. How did I do it? By making a plan and creating good habits over time. I started small and built on my successes.
I plan on doing the same this year. You can too, if you put your mind to it.
In fact, the brain can be reprogrammed at any time. The important thing is to start now, as it gets more and more difficult with age.
3 – Avoid High Interest Debts
There is good debt and bad debt.
Good debt is used to buy assets that either appreciate in value or generate cash flow.
Bad debt is used to buy liabilities that either depreciate in value or cost you money.
Understanding the difference between assets and liabilities is personal finance 101. In a nutshell: assets make money while liabilities cost money.
Avoid all debts and liabilities. That’s what I’ll be doing this year.
- Saving up to pay cash for important purchase, which implies:
- Renouncing to credit cards. If you must use them, making sure you honor the payments on time to avoid triggering the high interest rates.
- Renouncing to short-term consumption loans
- Renouncing to payday loans
- Not buying an expensive new car: I drive a 10-year old Toyota that has served me very well thus far. It’s far from flashy but it gets the job done. Why would I buy a $30K just to impress my friends? I won’t.
4 – Save 10% Of My Income
I will save 10% of my income in my emergency fund every month. This emergency fund is specifically earmarked for unexpected expenses such as job loss, car breakdown, serious medical condition or the need to relocate to another city/country.
I want to have at least 3 months living expenses in this emergency fund. Once I hit this target, I will keep saving to reach 6 months living expenses.
If I can, I will save more.
Once I hit the 6 months living expenses target, I will keep saving 10% of my income in a separate account to fund short term projects.
5 – Invest 10% Of My Income
I will invest 10% of my income in the stock market every month.
This means that 20% of my income is earmarked for savings and investments.
My preferred investments are ETFs, Dividend Aristocrat stocks and growth stocks of companies developing disruptive technologies.
Here are the man products I will be investing my money in:
- S&P 500
- Nasdaq 100
- ARK funds
- Dividend Aristocrats
- Dividend Aristocrats:
- Altria Corporation
- Growth Stocks:
- Lightspeed POS
- SES Imagotag
- and others…
Obviously, I can’t invest in all of these products every month.
Thus, I will invest in a select few based on the following criteria:
- Core portfolio of ETFs
- Buy the dip on my favorite growth stocks
- Periodic dividend Investing through ETFs and Dividend Aristocrats
I will document my investing journey in a video series so stay tuned for that.
6 – Invest 50€ Per Month In Cryptocurrencies
I have been interested in cryptocurrencies since 2019.
I currently hold the following cryptocurrencies:
I will invest the vast majority of my money in Bitcoin. However, I do want to add some Ethereum to my portfolio but I don’t plan on adding to any of my other cryptocurrency holdings this year.
I will also document my crypto investing journey in my video series.
7 – Invest in Gold, Lithium, Water and Food
I believe in gold as a (very) long term hedge against inflation.
I am also interested in the following commodities:
- Water (basic human need)
- Food (crisis-proof sector)
- Lithium (electric vehicle batteries)
I will inject funds in these products once every quarter.
8 – Finalize My Rental Real Estate Purchase
I am in the process of buying an apartment that I will be renting out. I am targeting an 8% yield on cost, with approximately 250€ monthly cash flow.
The cash flow will be dedicated to the following purposes:
- Paying the co-property charges
- Paying the yearly property taxes
- Saving for eventual repairs and maintenance
This purchase should be finalized during Q1 2021. The house already has a tenant so I don’t have to look for one. He may leave the apartment in summer of 2021 and I am preparing for that eventuality.
I will make videos on my experience investing in real estate, to share the mistakes I make and the lessons I learn.
9 – Increase My Income
Lastly, you can’t generate wealth by saving and investing small amounts of capital.
Thus, it’s very important to focus on increasing your income.
There are three main ways to increase your income.
- Taking online courses to boost your CV
- Starting a side hustle
- Creating a company or launching an online business
This year, I plan on taking online courses to boost my CV and I will also explore the possibility of launching an online business.
10 – Share my Journey
My last resolution is to consistently publish blog articles and YouTube videos.
This is difficult since I work full time and have various personal obligations.
However, I want to publish at least 2 articles and 2 videos per month.
This works out to 25 articles and videos per year. Obviously, I’ll publish more if I have time, but this is my minimum target.
Hopefully, this will inspire you to start saving and investing as well.
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DISCLAIMER: This article is the fruit of my personal research and should not be viewed as financial advice. I enjoy analyzing stocks and providing investment ideas but I highly encourage you to conduct your own research before investing in any asset. NEVER invest without having done proper due diligence and NEVER invest out of the Fear Of Missing Out (FOMO). Also, NEVER invest because some internet message boards are hyping up a high-flying stock. As a rule of thumb, the number of rockets included in a tweet are inversely proportional to the quality of the advice given.