The best financial resolution you need to make in 2021
TThe start of a new year is a time to look ahead – and make resolutions that can turn the future into something worth waiting for.
For many people, financial resolutions are making their way onto their list of goals, in large part because money management is about often a source of anxiety. While you can set many goals for yourself, you need to make one key resolution that stands out above the rest. In 2021, you should resolve to start growing your money so you don’t have to work so hard.
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Why should you resolve to make your money work for you
For many people, money comes and goes, spent on immediate needs and wants. This cycle repeats itself, making it impossible to meet big financial goals, such as saving for retirement or building an emergency fund that can provide a safety measure. This also explains why more than four in ten adults couldn’t cover a surprise expense of $ 400 – including nearly one in five households earning more than $ 100,000 per year.
If you just spend your money as soon as you earn it, chances are you’re not making the best use of it. And even if you aren’t spending every dollar, you may still be missing out on opportunities to make your money work as hard as possible for you.
If you are not currently using at least some of your hard earned money in the most efficient way to build wealth, resolve now to change that in 2021.
How can you make your money grow?
Putting your money to work for you involves taking a few key steps:
- Give a job to your money
- Make sure some of those dollars make you more money
Giving your money a job means making a budget that allocates it to the things that matter most to you. With careful budgeting, there are some things you can do. First, you can make sure you’re actually getting the most out of your discretionary spending. This is one way to make your money grow, as more focused spending allows you to squeeze every drop of fun out of your fun spending.
Second, and more importantly, you can make sure you allocate a good amount of your money to invest in income-producing assets. For most people that means put part of your money on the stock market. Investing in the market will probably be the best way to make your money grow, as stocks have a history that cannot be beat when it comes to balancing risk and potential reward.
When you invest money in the stock market, the returns you earn can be reinvested and actually earn you more money. Through the magic of compounding, the funds you’ve already invested in stocks can build a money-making machine that delivers exponential growth and enables real wealth creation – especially if you’re building a diverse portfolio of well documented actions.
This brings us to the third way to make your money work as hard as possible for you. It’s about developing a solid investment strategy to maximize potential gains while exposing yourself to the appropriate level of risk. For most people, that means choosing low-cost index funds. But for those with the knowledge and willingness to commit the time, that means using your money to build a portfolio of stocks that you are comfortable holding for the long term.
If you want your money to someday buy you freedom and security, making a New Year’s resolution to implement it for you in the most efficient way possible is the first step in getting there. It’s the one goal you can set for 2021 that will make the biggest difference in your life in the long run.
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