The new year is a great time to wipe the slate clean and ditch bad habits like eating too much, avoiding exercise, and stressing out too often. It can also be the beginning of a smart, secure financial future. Use the new year as an opportunity to start fresh with your finances and achieve some of your monetary goals. Here are nine tips to help you avoid spending too much, stash some savings, and manage your money better.
Calculate Your Net Worth
The easiest place to begin is by knowing where you stand. Take a snapshot of your current financial shape and work from there. You may not be as bad off as you think! Your net worth is everything you own minus everything you owe. Good money managers have a positive net worth, and that’s a good goal for you. Here’s a step-by-step plan from The Simple Dollar on calculating your net worth.
Once you’ve established how much you’re worth, take the time to…
Review Your Credit Report
Your credit report is a key piece of financial information that creditors use to make lending decisions. Your report and corresponding credit score can determine whether you qualify for the home, car, and credit card you want. Insurance companies and even some employers review credit reports for information. Order yours at www.annualcreditreport.com. This site is sponsored by all three credit bureaus. Go over every line. If you see creditors you don’t recognize, dispute them with the bureaus immediately.
If your credit score is low, start working to increase it so you can qualify for the best interest rates when you need a loan. High credit scores can save you tens of thousands of dollars over your lifetime.
List Out Your Debt…and Make A Plan to Tackle It
Peering deep into our financial make-up may be overwhelming and painful. But, to move forward to a promising financial future, it must be done. List out all your debt and total it up. Then list out the corresponding interest rates and fees you’re paying. Get a plan to start paying down the debt with the highest interest first. Keep paying what’s due on your other debts but concentrate on ridding yourself of that one first. Once it’s gone, add that money to your debt with the next-highest interest.
Paying down debt goes faster if you figure out how to free up more money. Sell some items you don’t use anymore, curb spending, or get a second job. Paying off debt should be a top priority in the new year.
Create Savings Goals
A safety net of a savings account can help you avoid going into credit card debt. Carve out some money to save every month. Even ten dollars adds up over time. Aim to save the amount of one paycheck first, then add another one until you have three months of expenses stowed away in your savings account. This money is your security blanket for unforeseen doctor bills, job layoffs and car repairs.
Write Out A Budget
Now that you know where you are financially, get a roadmap to where you want to go. How are you going to spend the money you work hard to make? Write down your set monthly bills. Take the remainder and split it up into paying extra on the debt discussed earlier, and what you will put in savings. After that, what’s left is your spending money. Use it to buy clothes, go to dinner, or engage in whatever activity entertains you. If it’s less now that you’ve changed your habits, see where you can cut back to make your budget work.
Cancel Subscriptions You Don’t Use
Subscriptions are budget-draining items that may add little to no value to your well-being. Get rid of them! That gym membership you never use? Gone. Your huge cable package? Cut. Have no mercy ripping through your subscription obligations and chopping them out of your budget. You’ll be surprised how much money this will free up for you to use on something else you want or need.
Use the 72-Hour Rule to Prevent Impulse Purchases
In this day of click-and-purchase ease, frivolous impulse purchases are easy to make. Buying something on a whim has led many people down the debt-ridden path of financial disaster. If impulse shopping is draining your budget, it’s time to stop the flow with the 72-hour rule. Nix buying that cozy sweater, awesome pair of shoes, or must-have new power tool for a 3-day period. Think over the purchase, see if it fits into your budget, and only then make your buying decision. You’ll be surprised how many of those items you really don’t want once you ponder them.
Pay Your Credit Card in Full Each Month
Using credit cards may be the biggest minefield you can walk through. It’s so easy to pop down the plastic! Only charge what you can pay off during the next billing cycle or leave it in the store. When your bills roll in, avoid the urge to let the balance ride. Many credit cards have high interest rates, which causes you to pay way more than the original purchase price if you allow a balance to carry over.
Proactively Plan for Taxes
Tax bills can derail even a seasoned budget follower. Keep this from happening by looking at your previous taxes, and if you had to pay, ask your employer to cut more out of each paycheck. If you’re self-employed, start a savings account and deposit your quarterly taxes into it just like you would pay any other bill.
Take advantage of the new year to get your finances straightened out and get yourself on a debt-free savings plan. Adopting these tips are sure-fire ways to be more financially stable and secure at the end of next year than you are today.