The New Year is a great time for a fresh start. Many people begin a new exercise routine, vow to eat healthier or organize their household. But what about your financial house? Getting a handle on how much money you have coming in, how much you are spending and what you are saving is a smart way to start the year and kick off good financial habits.
If you reorganize your closet, you start by taking stock of what you have. The same is true with your financial affairs. Start with a simple inventory. Add up your income from last year. Total how much you saved. Now collect your credit card bills and other bills you paid throughout the year to see where your money went.
Now is the time to have a good heart-to-heart talk with yourself. Are you surprised at how much you spend on work lunches? Did a lot of your income go to unused gym memberships or cable subscriptions? Do you take out lots of cash and spend it a dollar a time on things you can’t remember? Looking at how you spend will help you make a plan for the future.
Figure out what your spending priorities are and where you can trim expenses. Do you want to save more for retirement, emergency savings or college tuition for your kids? Would you like to see less money going to morning coffee and more going to date night? Map out what is important to you and make some goals to get rid of mindless spending.
Use mobile apps and online tools to help you track future spending and to see how you are doing on your savings goals. Some tools will allow you to link your checking accounts, savings and credit cards to make it easier for you to see where your money is going. Other tools allow you to evaluate your household cash flow, such as the Ameris Bank’s tracker.
Pay down debt
Gather the holiday bills and credit card statements and add them up so you have a total. Then figure out how much you need to set aside each month to pay them off. Write this number down and put it where you can see it, because organizing yourself is empowering. Start with the bill with the highest interest rate.
The easiest way to streamline your financial affairs is to automate yourself. Have your paycheck automatically deposited into your checking account. Set up a percentage to automatically go to a savings or investment account, to help you meet your long-term goals. Sign up for automatic payments to bills you pay each month, like your mortgage, so you don’t have to worry about late fees. Cut down on paper clutter by signing up for online statements. Scan important documents and save a copy to a secure cloud account, so you have a backup.
Take baby steps
When you are trying to lose weight or improve your health, you have to take gradual steps to improve your situation. The same is true with putting your financial house in order. Decide what is most important to you and tackle that first. Make a list of small changes that you can make each month to get closer to your goals, and by year’s end you can look back on all the progress you made.
Taking some time to organize your money and expenses now will pay off in the long run, helping you achieve your financial goals and earning you peace of mind.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.