Have you been thinking about saving more, spending less, or otherwise reevaluating your financial situation? The new year can be a great time to do a financial reset. This allows you to create healthy goals for spending and saving, providing a foundation for financial success in the years to come.
If you’re interested in understanding your current financial habits and establishing new ones, take a look at these six manageable tips for improving your financial health.
1. Determine Your Previous Monthly Spending
Before you can create a plan for your financial reset, you’ll want to evaluate your monthly spending. You can do this by determining your costs for rent or mortgage, utilities, recurring payments, groceries, and other expenses.
Take things one step further by separating your spending into essential and non-essential categories. Items like your rent or mortgage, utilities, and groceries would go under the essential category. Expenses such as dining out would go in the non-essential category.
2. Identify Habits That Have Compromised Past Financial Goals
Once you know how much you spend each month on essential and non-essential items, you can pinpoint the expenses and habits that slow your progress toward your financial goals.
How often do you order takeout? Do you make impulse purchases? Even small expenditures add up over the course of a month, and before you know it, you may have spent more than expected, making your goal to save a little more or make an extra loan payment that month wait until the next.
Once you’ve identified the habits that make it difficult to achieve your financial goals, you can be more mindful about avoiding those behaviors.
3. Understand Your Financial Priorities and Current Goals
What do you want or need to accomplish with your finances in the new year? Outlining your priorities can help you develop your financial reset goals. Whether you’re focused on saving for a vacation, investing, repaying debts, or building an emergency fund, your money goals should become your primary financial focus.
When you set intentions, your perspective is also important. A positive money mindset can make it easier to address your financial habits and create better ones.
4. Establish an Improved Budget and Begin Tackling Debt
Do you want to get serious about repaying your debt? You can tackle repayment with an improved budget.
When you’re reviewing your monthly expenses, you’ll likely note that many are non-negotiables, such as your mortgage, rent, utilities, and Internet. They don’t go away, even if you adjust your financial habits.
However, you may have non-essential items you can eliminate from your spending.
Entertainment
Your entertainment budget is an ideal expense to reevaluate when attempting to reduce costs. According to the Bureau of Labor Statistics, the average American spent $3,050 on entertainment in 2019.
If you’re no longer using a subscription service, cancel it so that you’re no longer paying for a service you don’t use.
Groceries
Feeding your family is important, but it doesn’t have to break your budget. It’s possible to eat healthy without excessive spending. Plan your meals in advance so you only have to buy items you know you’ll need – and use. Discovering alternative places to shop, such as farmers’ markets, can also help you cut costs.
Clothing
You may not need new clothing every month, but it’s something to factor into your spending – whether it’s a necessity or fun new outfit just because. One way to reduce your clothing costs is to buy second-hand. This has two major benefits: cost and sustainability.
High-quality, brand-name items often end up in thrift stores at lower prices than they’d cost brand new. Additionally, raw materials aren’t consumed with second-hand clothing. Shopping for second-hand garments is a cost-saving opportunity that’s good for both you and the environment.
Utilities
Lowering a utility bill often involves obvious solutions, like turning off lights when you’re done using them and conserving water. However, if you can also choose your service providers, you’ll have more room to cut expenses as well.
For example, Pennsylvania laws give consumers the right to choose an electric supplier. You can compare your distributor’s price with different energy sources to find the best deal.
5. Continue Working on Debt Repayment
Focusing on paying off your debt is one of the first steps toward financial freedom.
Before you start working on other long-term goals, develop a plan to repay your debt. Some repayment plans are better than others. Make sure you understand your debt so you can make informed choices about how to navigate repayment.
PSECU Can Help You Manage Your Credit Card Debt
Resolutions for the new year can encourage you to make positive changes to your personal happiness, professional success, finances, and other aspects of your life.
Get a fresh start on your spending and credit card debt in the new year with a financial reset. To get started, take a look at our options, and choose the right card for you.