It's that time of year again! Time for New Year's Resolutions! Maybe you're feeling a renewed sense of energy and want to hit the gym or try some new recipes to lose weight or are hoping to clean out your closet and make some updates to your home or maybe you see the new year as a chance to regroup on your spending and saving habits. If it's the latter, we'd love to offer a couple quick tips and some great resources from our friends at Schwab to help you revitalize your personal budget. You can start by taking this quick quiz to find out how financially stable you are.
Tip #1 Don't Spend What You Don't Have
While this tip is hopefully common sense, it's always a good reminder. Spending beyond your means is one of the quickest ways to find yourself burdened by debt. With the new year comes higher credit card rates - something you can easily avoid by making sure to pay off your credit card each and every month to avoid rolling over debt and having to pay those higher interest rates. To help you create a budget that's within your monthly net income, check out this great budget calculator.
Tip #2 Commit To Saving
Everybody says they'd like to save more, but very few of us actually do. I personally think saving is a lot like working out. Most of us start the year off with great intentions - going to the gym 5 times a week and eating healthy, but life starts to catch up with us and pretty soon we're only going a couple of times a week and at some point later on in the year we find ourselves not going at all. I believe one of the keys to exercising and saving is to view them less as goals and more as habits - like brushing your teeth. If you can make saving part of your routine, then it will greatly benefit you in the long run (as will exercising and brushing your teeth!). There are a variety of ways to go about building up this habit, including one I recently read about called the 52-week challenge (you can find a lengthier description here). In the 52-week challenge you save an additional dollar each week ($1 the first week, $2 the second week, $3 the third week, etc.) and by the end of the year, you have saved $1,378. What I like about this challenge is that it's not overwhelming. You start out small and work your way up. In order for us to create healthy habits for ourselves, we have to believe that they are doable. You don't create a habit out of exercising by trying to run a marathon your first week. Ask yourself what you can commit to saving that you will actually follow through on, tell a friend or family member who can help hold you accountable, and then stick to your commitment. You'll be glad you did.
Tip #3 Keep Track of Where You're Spending Your Money
One of the easiest ways to clean up your budget is to spend some time looking through where all of your money is going. Often, you'll discover trends that you didn't know were occurring. For example, you may not know it in the day to day when you're grabbing lunch with a coworker or going out to friends, but eating out can quickly add up. There are a ton of tools out there that can help you categorize your spending and allow you to see where all of your money is going (including this spending tracker). Once you're aware of your patterns, you can begin to see where you may need to cut back a little to help balance the budget.
We wish you the best of luck as you set out to form healthier habits in the new year and we encourage you to sign up for our weekly newsletter for more helpful tips on how to be financially healthy.