The following are 5 financial resolutions every Muslim can make to improve their finances in 2022:
1. Paying off your debt
Islam takes the matter of debts very seriously. In Islam, it’s essential to write owed payments down. Allah SWT has stated in the Holy Qur’an, “O You Who Believe! When you contract a debt for a fixed period, write it down…” (Al Quran 2:282). It is a command for Muslims that borrowing money, either small or large amounts should be written down in a contract. Furthermore, it’s also important to have two witnesses in the transaction. In the case of dispute, the involved parties then can use the document as proof.
As Muslims, we should remember that debt matters may stop one from entering heaven. The Prophet Muhammad once said, “If a man was killed in a battle for the sake of Allah, then brought back to life and he owed a debt, he would not enter Paradise until his debt was paid off.”
Therefore, paying off debts should become a priority for Muslims. These are some tips you can take to cut down your debts, such as:
- Create a budget. This is the first step to relieving your debt issues, allowing you to figure out the financial sources to pay off the debt and how to strategize.
- Reduce spending. Get rid of unnecessary spending such as buying brand-name clothes or pricey personal care products.
- Change your habit. Spend some time thinking about how you spend your money each day. Ask yourself: do I really need a latte from my favorite café every day?
2. Reduce your debt
Borrowing money is never declared as haram in Islam. However, Islam urges us to avoid having debts as much as possible. The Prophet Muhammad said, “O Allah I seek refuge with You from unbelief (kufr) and being in debt, he was asked that did you pronounce debt in the same level of kufr? He said: yes.”
Reducing debt will be a great resolution to do over the year, and you can put it high on the resolution list. Stop buying goods on credit. We live in a world where everyone is encouraged to live off credit. Consequently, many of us borrow money to finance a mobile phone or use a credit card to purchase monthly groceries. Break yourself of such a habit of buying on credit. Let’s apply the rule of “spending less than you earn”.
3. Make emergency funds a priority
Set aside some amount of your monthly income into your emergency funds. Most financial experts believe an excellent emergency fund should be able to cover at least 3-6 months’ worth of living expenses. We never know about the future. Bad things can happen anytime—accidents, employment terminations, natural disasters—and you need money at that time. Additionally, having emergency funds will prevent us from borrowing money when such unexpected expenses arise.
4. Diversify your investment
Making investments is a great way to grow your money and fulfill your financial goals. However, if your investments are not diverse, you can bring a financial disaster because markets can be volatile and unpredictable. We do not know for sure who will be at a profit or loss. Indeed, diversification means we spread our risk across different types of investments. It will minimize the risk of loss to your overall portfolio. Likewise, it safeguards you against negative market cycles. Besides, diversification enables you to have more opportunities for return.
5. Giving sadaqah regularly
A great way to show gratitude for your blessings is to be a blessing to other people. You might have heard a quote by the late Muhammad Ali, “The service you do for others is the rent you pay for your room here on Earth.” As Muslims, we should believe Allah (SWT) promises us that He will increase our wealth and sustenance and bring us success in this life and hereafter when we give sadaqah.
Indeed, the men who practice charity and the women who practice charity and [they who] have loaned Allah a goodly loan – it will be multiplied for them, and they will have a noble reward.Al Quran 57:18
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