With the challenges of Christmas already a distant dream, it’s time to start turning those New year’s Resolutions into action. Here’s our handy guide to setting – and sticking to – your financial goals in 2019:
1. Set concrete goals rather than an abstract intention
As evidenced by the packed January gym, many of us have set an intention to get fit and healthy this year. So often, we run out of steam after a few weeks (as evidenced by the busyness of the gym in February and March), and fall back into old habits.
The secret to success is to set concrete goals, rather than an abstract intention. So: Instead of perpetually postponing your date with the gym, assign one day a week that you’ll go straight from work. This kind of fixed plan works. And the same is true when it comes to your finances.
2. Invest quickly, simply and cheaply
If you look at your savings account interest with disappointment, it’s high time to think about investment. Exchange Traded Funds (ETFs) are both promising and easy to understand, directly reflecting the performance of the stock market indices. So if the Dax is clearly on the up, so too would a corresponding ETF. Statistics show that in the long run stocks always provide a positive return. For example, anyone who has been loyal to the German Dax for 15 years has been able to look back on an annual yield of more than 10 percent.
Another way of compensating for price fluctuations on the stock exchanges is via a savings plan. You set a fixed amount to buy monthly shares of an index fund. If the price is high, then you get only a few fund shares; if the price is in the basement – the best time to get started – then you get more.
3. Think about insurance
At least once a year, Germans should also dedicate themselves to the topic of insurance. Sure, rifling through thick folders for your different policies is not really an appealing task. But a lot has changed over the years, from liability to household contents, and it pays to keep on top of things. Perhaps your household has grown, for example, and you need to add cover for new bikes or an expensive hi-fi system
4. Follow the 50/20/30 rule of budgeting
If you want to invest you need to save, and if you want to save you have to budget, budget, budget! A good way to do so effectively is by following the 50/20/30 rule, putting those percentages towards fixed expenses, saving goals, and day-to-day spending respectively.
Say your net monthly income is $3,000. Here’s how it breaks down:
- Put 50 percent ($1,500) toward your bills (your “needs” category — fixed expenses like mortgage, utilities, car payments, groceries).
- Save 20 percent ($600) toward your goals (like retirement, a new car, and/or an emergency fund).
- The final 30 percent ($900) goes to day-to-day spending for the month (“wants,” like meals out, new shoes, movies).