by Shane Adair, Marketing Manager
The new year is a great opportunity to change habits, create resolutions and otherwise work toward a variety of personal and professional goals. When it comes to money management, you can make some relatively simple changes that have the potential to improve your long-term financial standing and enhance insight into how you spend, save and invest. Consider this advice as you start thinking about your resolutions for 2019.
Make or update your budget
If you don't have a budget already, you should consider making one before the new year rolls in. That way, the majority of the work is already done - you just have to follow the financial plan you've already made. A budget is a great idea because it lets you see how you spend. When you go through a few months of bank and credit card statements to account for your monthly or yearly spending totals, you may also discover bad spending habits or opportunities for improvement. Whether you want to understand if there's room in your budget to increase savings for retirement or simply understand where your money goes each month, making a budget is a must.
If you already have a budget in place, updating it before or soon after 2019 begins helps you stay current with any changes to your financial position. Whether it's a new job and a different wage, a new home and the changes in rent or mortgage payments that come with it, or something else entirely, a budget update keeps you informed and in tune with your income and spending.
Build your emergency fund
No one wants to think what would happen in a worst-case scenario, but planning for some potential hardship in the future makes it that much easier to address if it happens. An emergency fund acts as a buffer that gives you security as well as time to deal with distracting or debilitating issues that can reduce your earning power or take you away from work entirely. Nerdwallet said an emergency fund should aim to contain between three and six months of basic, necessary expenses. This should include absolute necessities such as rent, utilities, grocery money and transit, whether to address a car repair or pay for the train or bus. It's far easier to determine how much you need to set aside if you already have a budget in place.
Put your money to work for you
Having a significant amount of money in your savings account as an emergency fund - especially a high-yield savings or money market account that allows you to earn more in interest than is otherwise possible - is an important first step for financial stability. However, an emergency fund also generally represents a stable, static amount of money. Once you save it and set it aside - and make sure to add to it if your basic expenses increase - you don't need to dedicate much time or money to growing it. That's where investing comes into play.
You likely have a number of investment options, from retirement plans offered by your employer to individual long-term retirement options, stocks, bonds, derivatives and many others. Personal preference and thresholds for risk versus reward, among many other factors, influence the mix of investments that's right for your disposition and needs, but there's no doubt that carefully planned investing is a smart move.
If you're looking for an effective balance of return with a minimum of risk, consider investing in certificates of deposit. The principal of these instruments are guaranteed, yet they still provide a competitive return
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