As the New Year rolls around, we will inevitably be confronted with news segments, articles and just even talk with friends and family about the New Year and new changes we would like to see in ourselves. Weight-loss, better relationships with spouses, significant others, our kids or siblings and our finances are sure to be some of the topics that come up.
A New Year, a New (Financial) You
The beginning of a new year gives us an opportunity to do some self-reflection about things that we would like to change in our lives and about ourselves. If your like a lot of us, the only time we get real motivation to say “I’m making a change”, is typically around the New Year. A promise to do this, and a promise to do that, become our pledges as to how we’re going to transform ourselves for the better.
Now, most of us (us included …) probably won’t adhere to the majority of these resolutions for very long beyond the first couple days or weeks of January. But the thought of getting our finances in order represents a change that can make a difference throughout the year and for many years to come. It takes a burning desire from within you belly to actually accomplish change, both in ourselves and in the way we do things, which can be hard, in order to see positive progress with our finances. Hopefully, the following seven (7) tips can make it a little bit easier with smart money habits for 2019.
1. Make a Budget
You have probably heard this one before, but making a budget is very important when attempting to get a hold on our finances and it should be our very first step towards financial freedom. When making a budget, we have to be realistic about it, especially in terms of what it should accomplish and what we can realistically do (both cash-wise and in terms of discipline). Also, we have to do our best to stick to it! Even if we fall off track, we can’t beat ourselves up too much and never return to it. We should return to it instead of just giving up on it and ourselves. Splurging is not necessarily a bad thing. Continuously splurging is what makes us go bankrupt.
There is a lot of psychology behind why we get off track with our finances, including spending and budgeting. Don’t get overwhelmed when making a budget or when trying to make it day-to-day with just what you have. Then you can easily get deeper into a hole if you go undisciplined with your spending. Break it down to the day. How much in gas do you spend? How much for lunch? How much for vices? etc. Develop a reasonable plan and celebrate after a couple week of sticking to it with a small splurge on yourself.
When trying to make our paycheck stretch as far as it will go, it takes: 1) discipline, 2) planning and 3) prioritization. But we have to know what we have coming in, so that our budget can be effective.
Design your budget around some goals. Here are 7 tips for designing an effective budget: 1) know your income – this is so you know how much you have coming in each month. Net income after taxes. 2) figure out your basic fixed expenses, 3) figure out your variable expenses 4) prioritize, 5) follow your budget – review and revise monthly, 6) keep track and 7) use the Internet to find additional things that make sense and work for you so that the budget will be relevant and achievable.
2. Cut Back on Your Spending
Where can we make budget cuts, or even think about it as where can our savings come from? Doing things like making your own coffee, bringing lunch instead of buying it, sticking to a list when shopping, using coupons and apps to get deals, cutting down on utility bills where feasible (including cell phone and cable!). These simple things can help save hundreds of dollars per year.
3. Prioritize Your Financial Life
Have you ever heard the saying, “happy wife, happy life?” But happy finances mean a happier life too. We don’t have to be rich, just not under that never ending pressure and stress of not having enough to make it. Alleviating that stress comes from living within our means under a well-defined budget. Living above your budget not only creates a sense of control, but overwhelmingly leads to a more improved and balanced life.
4. Cut Your Debt
Cutting our debt means more money in our pockets. Here are four (4) tips for cutting debt. The better you can stick to these, they happier you’ll be.
- 1) target one debt at a time.
- 2) pay more than the minimum due.
- 3) Consolidate your debt if you can.
- 4) re-prioritize your budget.
5. Use An App to Help Stay on Track
One thing that comes from the millennial generation and the digital age is use of an app for everyday things. Therefore, use an app to make savings automatic and also use the app to make it show you when and where you are spending money. A lot of the time we forget things. Having them recorded electronically can drastically help you keep tabs of where your at in the month.
6. Boost Savings and Prepare for a Rainy Day
Knowing that savings are important, it has to be made a priority. Things like caring for an aging parent or having adult children living at home all affect your ability to budget and save. Start small and build up because savings are like a loan to ourselves when we need it most. Additionally, it is smart to line up potential credit that can be used in case of an emergency. The key is not to use that credit for general purposes though.
7. Review Things and Do It All Over Again
We have to review the budget always so that it stays relevant and remains something that will work for us on a daily basis. Continually do this reviewing to help the budget be something that makes sense to follow.
Conclusion
Make savings personal so that you find the best way that works for you, this means you will do it more. Generally:
- 1) make a budget
- 2) set savings goals (including an emergency fund/rainy day fund)
- 3) tackle your debts – managing your debt and savings go hand-in-hand. Do these things and the road to financial freedom will be here to stay!Resources:
“Break Your Spending Addiction.” Khalfani-Cox, L., AARP, 28 August 2018. https://www.aarp.org/money/budgeting-saving/info-2018/break-your-spending-addiction.html. Accessed on 21 November 2018.
“5 Reasons Your Budget Isn’t Working.” Better Money Habits, Bank of America in Partnership with Khan Academy, 2018. https://bettermoneyhabits.bankofamerica.com/en/saving-budgeting/how-to-stick-to-a-budget. Accessed on 21 November 2018.
“4 Strategies to Pay Off Credit Card Debt Fast.” Better Money Habits, Bank of America in Partnership with Khan Academy, 2018. https://bettermoneyhabits.bankofamerica.com/content/bmh/en/debt/how-to-pay-off-credit-card-debt-fast. Accessed on 20 November 2018.
“Steps to Better Money Management.” Better Money Habits, Bank of America in Partnership with Khan Academy, 2018. https://bettermoneyhabits.bankofamerica.com/en/saving-budgeting/steps-to-better-money-habits. Accessed on 21 November 2018.
