Take your personal finances to the next level in 2021

Thank god 2020 is behind us. It wasn’t the best year for personal finance. Let’s make 2021 a better year. Here are my top tips for taking your personal finances to the next level.

Start Investing. Don’t just save.

If you’re saving money in a bank account, you could actually be losing wealth! Why? Inflation! 100 years ago, $1000 seemed like a huge amount of money. Each year the costs of goods and services increases in value due to inflation. So your money buys you less and less each year.

In the past you could rely on a high interest savings account to counter inflation. But not anymore. Interest rates on savings accounts are next to nothing.

So how do you beat inflation? Invest! These days you can use investing apps to invest in a diverse portfolio of stocks and etfs. These portfolios are not only designed to beat inflation, but they are also designed to grow your wealth.

Investing has had the biggest impact on my wealth. I only wish I had started sooner!

Take a tiny big risk

One tip I picked up from Mark Cuban is to invest a tiny amount of your net worth in something that has the chance of bigger returns. One example would be Bitcoin. If you had invested a small portion of your net worth (even less than 1%) in Bitcoin a few years back you’d have made a big return.

With these type of investments it’s important to never invest more than you can afford to lose.

Pay Down Debt

If you have a home loan with an interest rate of 2%, paying this down super quick won’t make a huge impact on your financial situation. But if you have credit card debt with interest of 19% then paying this off will make a massive impact going forward.

It’s easy to try and ignore debt but the best thing you can do is come up with a plan. This might mean refinancing all your debt into a loan with lower interest. Or coming up with a regular repayment plan.

Just come up with a plan! Don’t ignore it.

Setup an Emergency Fund

If 2020 taught us anything, its that unexpected things do happen. And things can change fast. An emergency fund is portion of cash you’ve set aside for emergency purposes.

An emergency fund could stop you from going into debt if you have any unexpected expenses.

An ideal emergency fund would be equivalent to 6 months living expenses. Building up that type of fund is going to be out of reach for most people. Instead just look to put aside a little bit each week into a seperate savings account. This account isn’t for paying for your next holiday! Keep it just for emergencies.

Track your Net Worth

Before you can really take your finances to the next level, you need to know where you currently stand. This means figuring out exactly what your net worth is.

You can use a simple spreadsheet for this. Put in all your debts (liabilities) and yours assets (such as bank accounts, investments etc).

There are also apps you can use to automatically track everything. WeMoney is one that i’ve used (it’s Australian) but there are similar apps for most countries.

Each I also use a spreadsheet to track my investments. It’s fun to check in each week to see how well things are doing.

Increase your Income

The easiest way to save more money is to make more money! I make a full-time income from blogging. This took me quite a few years to build up. At the beginning though it provided me with a great second source of income.

There are literally hundreds of different side hustles you can start. It can be tough to get going, but once you’ve got something setup it will make a massive difference to your life.