Whether it’s saving more, spending less, or generally improving your financial situation, the new year is a great time to start getting your finances on track. Many people feel motivated to make changes at the beginning of the year, as it gives them a clear start date and allows them to lay the foundation for good decisions throughout the year.
If you’re looking to reset your finances in the new year, here are six tips to help you get started.
Set aside time to comb through recent financial statements, such as checking accounts and credit cards. Take an honest look at your spending – what was necessary and what was just nice to have?
To get ready for the year ahead, make a list of what monthly spending will remain necessary, such as rent/mortgage, utilities, cell phone bills, etc. Then make a list of what recurring leisure spending you’d like to keep in your budget – whether that’s a gym membership or a monthly date night.
Being realistic about your spending (especially the “nice to have” items) in advance can help you plan ahead and make sure you’re managing your money in a way that allows you to keep these items within your budget.
Are you an impulse buyer? Are you tempted to make purchases just to keep up with neighbors or friends? Or do you simply not track what you’re spending?
Whatever bad habit you may have developed over time, make a plan to overcome it. For example, to avoid impulse purchases, implement a waiting period before you buy something that wasn’t in your budget. Or to keep yourself on track with spending, set aside time each week to review your purchases and see where your budget stands.
Knowing what you want to accomplish will help you keep the big picture in mind when you’re tempted to make purchases that are outside of your set budget. And only you can determine what those goals and your other financial priorities are.
For instance, you may prioritize travel and therefore decide to cut back on how often you order takeout so more funds are available for your trips. Or you may value having a family movie night each week and decide to set aside money for a pizza and snacks on Friday nights and commit to cooking the rest of the week.
Getting rid of debt doesn’t have to be overwhelming. Make a list of what you owe and who you owe it to – including balances and interest rates. Having everything in one place will help you make a plan to manage it.
To start making a plan to pay it down, compare the rates you’re paying currently to what’s available in the marketplace. Depending on how old the debt is and changes in your credit score and other financial standing, you may be able to save money by refinancing to lower interest rates on loans for your home or car and even credit card debt.
While it’s important to focus on managing your spending and budget, as well as paying down debt, don’t get so focused on these goals that you skip saving.
Having money set aside for a rainy day can help you avoid going into new or additional debt if an emergency arises in the future. Even if you don’t feel like you have much to contribute to a savings account, every little bit counts and can add up quicker than you might think.
Once you commit to resetting your finances in the new year, it’s important to continue learning money management tips to stay on track and improve your money know-how. We’re happy to provide members and nonmembers alike with free resources to help you learn how to make your wallet work for you.