As the year comes to an end, you can be evaluating your finances. Regardless of what your financial situation is, the new year marks a nice place for you to reset your financial goals and have a better understanding about you should do the following year to make sure you are in a better financial situation.

1. Reflect on Your Finances from the Past Year

    Look at your finances over the past year. See where your money went. If you are constantly spending cash on going out to eat instead of buying groceries, you can make the goals for next year to retrain yourself on better spending habits. Just as you look for the negative, look for the positive spending habits that you have as well. If you stopped spending money on extra unnecessary items like brand new clothes every paycheck, then that is a good habit that you learned! It is good to look at all aspects of your financial behavior in order to have a better understanding at how to plan for the goals for next year.

    2. Set Financial Goals for Yourself

      The first steps into the right financial direction include making sure you know why you are going to work on your finances. You need to set personal goals for yourself in order to understand your financial goals. Whether you need a new car, want to upgrade your house, want to buy a new gaming console, get some tattoos, etc. Whatever expenses and goals that you want to achieve you need to write down. Once you know what your personal goals are, the next step is figuring out how to achieve those goals financially. You need to create a budget plan for yourself to view your monthly expenses. You want to know how much money a month you will be receiving after tax, how much your bills are, and then how much you will put away in savings. Once you see how much you are getting a month after taxes, this can be a good wakeup call. If you aren’t making enough money to achieve your financial goals you can see if you can get a raise, or maybe even change jobs. When looking at bills, see what payment can be automated so you don’t miss any, and make sure you have accounts designated for the right financial situations. You should have a savings account for savings, a checking account for bills, a 401(k) account, etc. 

      3. Look into Medical Investments

        Medical investments can really help your finances if you go about them properly. There are many different types of investments that are worth looking into. One of the main ones if biotech investments. This investment is a risky one because it can either improve your investment substantially or you can take quite a hit and lose a majority of your investment. It is also hard to trust these startup companies because there is no history or track record. You cannot look at empirical data because there isn’t any especially if the investment is on something that has never been done before by any other company.

        A better and more secure investment would be a real estate investment trust (REIT). This investment is stable because if you are looking at real estate in regards to hospital properties, there are pretty consistent dividends as well as low interest rates.

        If you are looking for an investment that is related to pharmaceutical investments then a stable option that you can look into is called an exchange-traded fund (ETF). An ETF is similar to a mutual fund because it is a diversified portfolio that contains many assets yet had the tradability of a stock due to how easy it is. You ensure that your stocks don’t plummet in case of a failed trial, however, you also can’t increase our earnings as quickly with this type of investment. Yet, the reward outweighs the risk.

        You may also be interested in investing in individual stocks. The reason that people prefer the above-mentioned stocks is because it is hard to lose a substantial amount of money. However, just like it is hard to lose a substantial amount of money, it is also hard to make a significant amount of money. When you invest in stocks, you can get more gain than other types of investments.

        Any extra money you may get during the year whether from bonuses or tax refunds, should be put towards investing or saving to make sure that you don’t waste any money opportunities.

        4. Don’t React Too Rashly When There is a Market Change

          If you do decide to hop onto the investment boat, you will need to mentally prepare yourself. You may notice that the market will downturn and you’ll be temporarily losing money. The key word is temporarily. The common mistake that people will make is when this temporary downturn occurs, they immediately sell their investments to avoid losing money. However, it is common for the market to fluctuate whether good or bad, so in order to avoid this common mistake it is super important that you follow a consistent, stable, long-term strategy.

          5. Increase the Amount of Money Going Towards Retirement

            One of the smartest changes you can make towards your finances is dedicating the necessary amount of money to fully take advantage of your 401(k) (or whatever retirement plan you are enrolled in). The beauty of these retirement plans are the higher amount of pre-tax income you put into the account, the less you will have to spend in taxes on your income the following year. This means that the amount of money that you earn will be able to grow on a tax-deferred basis.

            Another benefit of the retirement plans is that the cap set towards contribution on these limits, is something that most people don’t expect to reach. For a majority of plans (each plan is different so be sure to see what your plan specifically offers), the cap for anyone below 50 is $19,000 and anyone above 50 is $25,000. Due to the higher caps, a majority of people aren’t able to reach them which means you can comfortably put as much money as you want away in these accounts. Depending on the retirement plan, you may be able to increase your limits as well!

            6. Have a Financial Cushion

              While it is important to be assiduous about your investments and saving for long-term goals, you should also have money saved in case of an emergency. A good rule of thumb is to have 6 months of total bills saved up. If your total monthly expenses are $1,000 a month, then you should have a $6,000 cushion in case of any emergency. You will be able to have enough money to be able to deal with a large expense, and even if the expense is greater than the amount saved, you can make a solid dent into whatever unexpected expense comes up. In order to fully keep this stash of cash separate, it would be smart to have another savings account specifically for this emergency fund. This is also a good cushion to have just in case any investment choices are not handled properly.

              7. Prioritize Yourself

                This is especially meant for caring individuals. People who are caring, especially women, tend to put others first, whether that be family or friends. However, you need to make sure that you are not only setting financial goals for yourself but also sticking to them. Your friend may need to borrow money or else their car will get repossessed. While that is an unfortunate situation, that’s not your problem. You cannot hold yourself responsible for other people’s finances, especially if you aren’t in the position to do so.

                Any extra money that you would be willing to put towards someone else you can put into your 401(k), invest, or put towards your savings cushion. This is also important because even if the person you lend the money to promises to pay you back, they most likely will not pay you back in a timely manner or pay you back at all. You don’t want to put yourself in a worse off situation for someone else.

                8. Prep for Your Taxes

                  This is a common mistake for many Americans. You want to make sure that you are receiving every deductible possible on your taxes. Many Americans miss out on easy money-saving opportunities. This is why it is important to work with tax experts to break down your finances and see exactly what you can do. If you invested last year then you want to take a look at some of the equities you have that you may want to sell based on their low performance. That saves you money through the process called tax-loss harvesting. If you have a Flexible Spending Account (FSA) then you are eligible to spend that money in the account before the year is up on any medical expenses. If not then you just waste the money that was put aside into these accounts.

                  Overall there are many ways that you can improve your finances for the following year. The hardest part is actually sticking to the changes and handling them responsibly! If you exercise some self-control then you are able to achieve these goals and put yourself in the right situation.