It’s a new year, which means it’s time for new finances.
Whether you’re struggling with debt, impulse purchases, or simply don’t feel like your finances are organized, there’s a positive way forward. All it takes is some organization and commitment, and by the time next year rolls around, you can look back with pride over the changes you’ve made this year.
If you’re ready to succeed financially, get started with these five steps:
The number one way to gain more control over your finances is to create a budget. With a budget, you’ll learn how much money you’re spending and what you’re spending it on. Then, you can make adjustments as necessary. For example, if you discover that you spend half of your food budget on take-out, you might decide to limit your take-out to 25% of your food budget to save money.
Looking for more budget tips? Check out this interview where I explain some common budget struggles.
Have you ever thought, “Well, if I have leftover money in my budget at the end of the month, I’ll save it”? This is a common approach, but it’s one that won’t get you very far. Instead, every time you receive a paycheck, set aside the amount of money you’d like to save right away. Put it in your savings account so that it’s out of sight. Then, spend what’s left on your expenses.
Did you know that inflation in 2021 was nearly 7%? Ultimately, inflation means that each year, your money loses purchasing power unless it’s earning interest at the same rate as inflation. Earning 7% interest isn’t as easy as popping your money into a savings account. In fact, the average savings account earns just .06% interest.
So, what can you do to preserve your money’s value? There are many excellent options such as:
Unexpected expenses such as car repairs or medical bills can send your carefully made financial plans into a tailspin. This is why you need an emergency fund. The global Covid-19 pandemic brings uncertainty to jobs, childcare, and many other aspects of life, only making an emergency fund even more important.
An emergency fund should hold 4-6 months of living expenses. That way, you won’t sink if you lose your source of income or an unforeseen expense comes up.
Finally, to succeed in your finances, you’ll need to develop good money habits. Here are a few tips:
If you take these five steps, you’ll find that this is the year you’ll shine financially! Just think how satisfied you’ll be a year from now and you see how far you’ve come.