According to a recent Bank of America poll, increasing savings and paying off credit cards were among Americans’ top financial New Year’s plans in 2024. Setting financial objectives might be easier said than done.
Vivan Tu, a former J.P. Morgan trader-turned-TikToker who now dispenses personal finance advice to her millions of followers as “Your Wealthy BFF,” says that when people think of budgets, they think of something that’s restricted and makes their lives pretty unpleasant. But, becoming more financially savvy can be easy. “Budgeting can be really easy,” says Tu.
Here are her top three ideas for improving your financial situation in 2024.
Adhere to the 50/30/20 technique.
The 50/30/20 technique is one of Tu’s favorite ways to budget since it simplifies the process. It just asks you to track three expenditure categories and can assist you in creating a budget you can stick to.
To use this technique, allocate fifty percent of your salary to necessities such as rent and food. Next, Tu suggests setting aside 30% for desires like dining out with friends. Finally, allocate 20% of your funds to savings, investments, retirement, and debt reduction.
It is OK to be wrong by a few percentage points when dividing the money. The recommendation can serve as a starting point; you can change the figures based on your lifestyle.
Balance reducing debt and investing.
High-interest debt may quickly become unsustainable, and it might be tempting to devote all your funds to reducing it.
Nonetheless, saving for the future is also essential. The earlier you begin investing, the longer your money has to grow and generate compound interest.
It may appear that you must pick between the two, but it is possible to do both. Tu suggests that you begin by paying off loans with high-interest rates, and higher interest rates will cost you more over time, and therefore it is prudent to pay off loans with the highest rates first.
Secondly, you should concentrate on paying off loans with lower interest rates. While low-interest debt is typically less expensive, you can also begin investing in your 401(k).
Market volatility should not deter you from investing.
Statistically speaking, if you plan to retain your assets and be a long-term investor for more than 40 years, your chances of losing money are minimal, and your wealth will rise, according to Tu.
Find an accountability partner.
Whether saving for a vacation or pledging to spend less money, sharing your financial goals with others might help you achieve them. Her greatest recommendation is to write it down on paper and do so in front of a friend. Make it, so everyone knows about this objective, Tu adds.
It might be simple to disregard failure to accomplish a goal that no one else knows about, but it’s a bit more embarrassing to miss a goal you’ve shared.
Thus we can shame ourselves into being more fiscally responsible when doing something with a friend, adds Tu. She adds that if you and a buddy are both attempting to be more financially successful, it might be more enjoyable to do so together. And while it may feel taboo to discuss financial improvement openly, there are advantages to doing so.
“If we all discuss money, we would all be better off,” she asserts. Everyone can help improve the situation when couples and families talk freely about financial goals.