What are Your New Year’s Financial Resolutions?
With the new year almost underway, it is that time when many people make their new year’s resolution. Most often, people vow to lose weight and start working out or quit a bad habit that caught on over the years, but what about a resolution for your finances?
Whether we like it or not, our money effects our emotions, our health, relationships, how we live, what we do, where we work, and more. Whatever your current financial situation may be, there’s always something that can be improved upon or a goal to be achieved. Why not use the New Year to create some goals for your bank accounts and financial life?
New Year’s Financial Resolutions
Here are six ideas for new year’s resolutions you can make for your money this year:
- Make a budget. Whether you’re in debt or you have an abundance of money, there should always be a budget. Budgets help keep us on track with the amount we’d like to earn, spend, put towards debt, and save, and make us aware of our financial situation. You need to earn more than you’re spending. That might sound simple enough, but it can be tough for people, especially when they’re not exactly sure how much their making or where there money is going. To manage your budget by tracking your spending write down all of your income, and set it aside. Next, make a list of all the concrete bills you have every month such as your mortgage or rent, electric, gas, car payment, credit card bills, phone bills, and so on. Next, write down how much you spend on flexible items that can change like food, clothing, transportation and gas, gifts, toiletries and beauty supplies, and other. You can find the total of this by averaging the amount you spend for three months. If you subtract what’s going out from what’s coming in and it doesn’t add up, you need to figure out how to make more money and/or spend less.
- Be completely aware of your finances. I have to admit that it wasn’t until I graduated college that I really realized and was aware of the total amount of student loans I had. The first step in dealing with these student loans, and any other debt, is knowing exactly how much I owe and how much interest I’m paying every month. If you’re in debt, you need to know exactly how much and what is the interest on it. This way, you can make a sensible plan to get rid of the debt. You should also dissect your current spending habits to see what you’re giving your money to. Going out to lunch and dinners a few times a week and buying your coffee in the morning may not seem like much at the time, but once you realize you’re spending more than $500 a month on these purchases, you may want to make a change.
- Eliminate unnecessary purchases. Stop buying things you don’t need is simple, but very effective. This is something you can do while you’re creating your budget. Go through each item you buy, and ask yourself if you really need it. This requires patience and time to think about what’s actually important in your life. But we are human, and many times, we are going to occasionally spend money on a “want”. When it comes to non-necessities or luxury items, have a balance. Trouble happens when people start buying everything they want. You might not want to give up golfing or getting your hair done, but there are most likely other things you will be able to part with.
- Stop lazy spending. This sounds similar to eliminating unnecessary spending, but it is actually an entirely different beast. It’s simply the money you spend out of laziness or to put it in a nicer way, for convenience. Paying an ATM fee instead of swinging by the bank to take out money is a good example. Not checking what you have before you head out to the grocery store and double buying in a lazy mistake I always used to make. If you don’t want to take the time to look for a deal, this is a lazy act. Another big mistake is not taking the time to look at your bank statements, credit card statements, and other bills that you have. This is a little easier to overlook since many have auto withdrawal from their checking to pay certain bills or we just pay for bills online. But you can easily be missing an incorrect charge or an unexpected fee. Just recently, I realized I was charged twice for a restaurant bill. If I hadn’t looked, I would have easily missed it. A more serious instance of this is not paying your bills on time. When you do this, you are wasting money on paying late fees. Unfortunately, this also can result in higher interest rates and lowering your credit score.
- Get out of debt. If you’re in debt, there’s a good chance the thought of being without it seems unreachable. But you can execute a plan to eliminate or drastically reduce it. First, know exactly what you owe and what your interest rate is. Then start making a plan to put more money towards it by earning more and spending less. There’s many ways to earn more money such as finding a job that pays better, taking on a part-time job or side jobs, sell your unwanted possessions online or at a resale shop, sell crafts or something you make, and more. Spend less by evaluating each purchase and try to cut some of your bills.
- Make a financial goal. Wiping out any debt is usually a good first goal. But if you don’t have debt, you can create your financial goals, somewhat of a financial bucket list. You can be specific, with a specific item you want to save for, like a new car or a vacation. You can also make large financial goals like being able to take a year off work to travel, go back to college, buy a second home, pay for your child’s college, or when to retire. Having goals gives you direction and a purpose in earning money besides just paying bills every month.
What is your New Year’s resolution? What are you going to do different this year with your money?
One thing I could definitely work on is lazy spending. So guilty of that. Great tips!