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New Year, New Financial Habits

As 2021 begins, it’s a good time to think about new goals and habits. Having written about investing in 2020, my financial habits will be a big part of this. It’s hard to change too much too soon and, as an imperfect human, I’m focusing on little things that can collectively have a big impact in the long run. Here are five small changes I plan to make in 2021.

1. Tracking my Expenses

Any attempt to improve my finances has to begin with knowing how I spend my money. I went to the bookstore a handful of times last year, but I have no clue about my total expenditure on books in 2020, or in any given month. Simply acknowledging the way I spend money (without judgement) can provide actionable insight. In the past I’ve used spreadsheets, but now I find an app much easier to capture spending on the go. In order to save for bigger purchases or regular investments, I have to know how much, if anything, I have saved at the end of each month.

1. Evaluating my Expenses

The next step is evaluating my expenses to see what changes I can/should make. The app or spreadsheet (most likely a combination of both since I’m an Excel nerd) can show me my monthly or annual expenses. The key change here is ensuring that I’m consistently evaluating my expenses once a month. Tracking expenses without analysing them is what a bank statement does. I can make this system as easy or detailed as I want. I can set a limit for eating out, clothes, etc. or focus on the big-ticket items, but the idea is to customize it so it works for me as an individual. In 2021, my focus will be to regularly ensure that I’m meeting my savings and giving goals.

1. Giving

Charitable giving and tithing have always been important to me, and in the midst of the pandemic, giving has been especially necessary. In the past, I’ve given haphazardly, without thinking much about it. I always assume that I’m giving a good amount, but without keep track of it, I actually have no idea. This year I want to be more systematic about it and ensure that I’m meeting my giving goals every month.

1. Not Sweating the Small Things

In the process of improving my finances, it’s easy to strive for perfection, i.e., an easy recipe for eventual failure. The flip side of excessive evaluation is that every purchase can feel burdensome and lead to unnecessary guilt. But the idea is to make sure that the big things are covered. If I’m meeting my saving and giving goals, I don’t need to think too much about whether or not to buy a fancy coffee. Keeping it simple will help me stick to this system.

1. Understanding my Taxes

Having an accountant father has meant that I’ve always been lazy when it comes to taxes. I’ve never bothered to figure them out because I know he will take care of them. And while I don’t intend to deprive him of that joy entirely, I would like to get a better handle on my taxes. For instance, I want to have a general idea of what my provident fund contribution is through work and what investments I need to make to maximise my tax exemptions.

In 2020, I finally took steps to figure out my investment strategy and automated the process so I only need to check on it once in a while. Till last year I generally avoided the whole idea of investing and told myself I would deal with it some day in the future. During the pandemic, that day finally came. Now that it’s done, not having it looming ahead of me is a big relief. If I can make these additional small changes by 2022, my finances can safely resume a back seat in my life without being a cause for anxiety.

It’s already clear that I would have benefited from implementing these habits much sooner. But there’s really no time like the present. And around the new year, there are plenty of cheesy memes that say something to the effect of ‘six months from now, you’ll wish you had started today’. Imagine how much worse I would feel thirty years from now if I had never started in the first place?