After the expensive holiday season, it should come as little surprise that money is on most people’s minds. Some variation of “save more” or “spend less” is near the top of the majority of New Year’s resolutions, demonstrating that most people fear for their future financial security. However, without proper guidelines (or guidance) set by such vague self-promises, fewer fiscal fretters are likely to succeed in their goals than those who aim to lose weight or stop smoking.
The key to saving more and spending less is making a mere handful of financial decisions. Starting January 1, 2016, you can become smarter with your money by following just six specific resolutions to a secure financial future.
1. Devote Money to Debts
If you are like most Americans, you have some debt. Whether it is from student loans or credit cards, a mortgage or small business loans, you should always strive to be free of your financial obligations for a dozen and more reasons. It is entirely possible to pay off massive amounts of debt in unexpectedly short amounts of time, but you must devote yourself fully to the endeavor to see results. Here is one method that works for most:
⦁ Avoid creating new debt
⦁ Organize your debts by interest rate
⦁ Build a budget (see resolution three, below, for tips)
⦁ Create a repayment schedule
⦁ Reward your successes
2. Reorganize Your Records
You cannot honestly tell yourself that the teetering stacks of paper covering your desk follow any sort of organization strategy. Disorderly financial records often wreak havoc on your ability to save and spend properly — and have other unexpected effects on life — which means it pays to have your office neat and tidy.
If you don’t already have a filing cabinet or any space to hold files in a logical manner, you would be wise to procure one. Then, you must sort through all of your documents and categorize them. Some example categories are:
⦁ Bank Accounts: monthly statements
⦁ Bills Due: monthly bills that are as yet unpaid
⦁ Credit Cards: annual credit reports, monthly statements
⦁ Health Care: health insurance information, pharmacy receipts
⦁ Tax Records: W-2s, 1099s, charitable contribution receipts, other annual tax information
3. Build a Budget
The word “budget,” like the word “diet,” is familiar but often misunderstood. A budget is not a restriction of spending freedom; rather, it is a method of understanding your financial situation and striving to make it better for the future.
Even the wealthiest person on Earth (still Bill Gates, by the way) benefits from crafting a budget. All it takes is analyzing your incoming money and your outgoing money and seeing where you can decrease the latter to increase the former.
Of course, it isn’t enough to draft a budget — you have to live by it to see any real financial benefit. Here are some tips to help you stick to your budget for the rest of 2016:
⦁ Ask for support from family and friends
⦁ Recite why you need your budget
⦁ Use cash only
⦁ Reward your successes
4. Fill an Emergency Fund
If by some miracle you lack debt, you have a steady job, and you live somewhat comfortably even without a well-fed savings account, you might think you are doing all right. However, the truth is your finances could fail you at any moment. Catastrophe usually strikes when you least expect it, and when you are living paycheck-to-paycheck, even a minor issue could devastate your finances for months or years. As soon as possible, you must begin channeling money into an emergency savings account. Most experts assert that three to six months of salary is an appropriate amount, but more is always better.
5. Increase Your Income
These days, you might find that a full-time job just barely covers your expenses. On the one hand, this might indicate a failed budget attempt; on the other hand, it could mean it’s time to start side hustling. Forty-hour workweeks leave little spare time to pick up another job, but there are many more ways to make money besides employment. For example, these hobbies easily translate into extra income:
⦁ Social Media
6. Liaise With Loved Ones
You may be the main breadwinner of the family, but that doesn’t excuse everyone else under your roof from being money smart in 2016. Every adult in your household should understand the state of your finances and your new plan to make this New Year the richest one yet. Additionally, the younger you start teaching kids about financial matters, the more financially independent they can be as they age. Money might not be fun to talk about, but it is an important aspect of your lives, and your loved ones must work together to build the financial future of your dreams.