As the new year starts, we reflect on the past year and look ahead at the year to come. If working toward financial security is in your plans, consider incorporating the resolutions below.
There’s no better place to start than determining what your income is and where your money is going. To do this, look back at previous statements or track your income and expenses for thirty days. Use this information to adjust; create a plan for future spending and saving that will help you reach your financial goals.
- Don’t let expenses exceed income; force yourself to work with what you have
- Prioritize your spending and always incorporate savings
- Use apps like myFinance to track budgets, income, and expenses all in one place
For step-by-step instructions on how to build your budget, click here.
Part of taking control of your finances involves evaluating expenses. This isn’t necessarily to limit ourselves but to be more mindful of what we do with our money. Go through and ask yourself the following:
- Do you need it?
- Can you get it for less?
If you don’t need it, eliminate the expense. If you can get it for less, start saving.
- Cancel memberships and services that are no longer used – gym, club, cable, etc.
- Change everyday habits: pack a lunch, reduce energy, buy generic, and so forth
- Call your insurance agent, wireless carrier, and the like to inquire about discounts or alternate plans
Pay down debt
According to a study by NerdWallet, the average household with revolving credit card debt carries a balance of $7,849.
When tackling debt, credit cards are a good place to start. They have some of the highest interest rates and we can usually avoid this type of debt with smart-use of credit.
- If you know you’ll be tempted, leave your credit cards behind and pay with cash
- Try to pay balances in full and always make more than the minimum payment
- To pay the least amount in interest over time, consider paying more towards the debt with the highest interest rate
Learn more about the Five Steps to Get Out of Debt here.
Save for a rainy day
Establishing an emergency fund and saving in general lets us rest easy knowing there is some breathing room in our budget for unexpected events or expenses. It may be an adjustment, but you’ll get in the habit and be glad you did.
- Pay yourself first: put money in savings before doing anything else
- Automate savings by creating automatic transfers or modifying your direct deposit
- Keep funds in an account you can’t easily access to avoid needless withdrawals
If you haven’t already, now is a good time to create or review your will. Keep in mind, you’ll have to update the beneficiary on life insurance policies, retirement accounts, and annuities periodically as these designations supersede legal documents.
Speaking of retirement accounts: did you know you’d have to save approximately 15% of your income to replace 70% of it at age 65? Don’t be intimated. You need to start some place and today’s the best time to do it as the longer you save the larger potential return.
- Aim to increase your contribution annually and when you get a raise
- If your employer has a match program, contribute at least the percentage matched
- If you are 50 or older, take advantage of catch-up contributions to boost your retirement savings
Need guidance on starting to save for retirement? Click here.