The New Year is traditionally a time of renewal. We have never needed renewal more than right now, as 2020 rolls over onto a clean slate for 2021! Now is a great time to make bold, decisive changes in your life. If you’re looking for some resolutions to improve your finances, we’re pleased to offer seven ways to make this your “Year of the Dollar!”
1. Track your spending
If you’re looking to take the first steps toward financial freedom, figuring out where your money goes should be at the top of your list. If you don’t know where your money goes, it’s going to be tough to follow through with any other money plans. You may have a general sense of how much you spend, but after a month of recording where every dollar goes, you’ll have a much better picture. Using apps like Mint or Personal Capital can automate the process. You’ll probably even find keeping track of what you do with your money encourages you to spend a little more sensibly.
2. Make a budget
About 70% of Americans live financially spontaneous lives; they don’t make a plan for spending or saving. When asked why they chose not to do so, the most common response was that the family spent all the money anyway. This is a circular problem. If you don’t have a budget including and prioritizing savings, you won’t save. To win at the savings game, you must plan to save, then save as planned. The best way to cut back on impulse purchases is to build a budget that outlines spending in line with your priorities and needs, while being realistic about your wants.
3. Get out of debt
Easier said than done, right? However, there’s no bigger stumbling block to financial security and wealth building than debt. It’s hard to save for long-term goals when so much of your monthly income gets eaten up by interest and fees. There are a variety of methods you can use to help accelerate your payoffs. For instance, you can add an extra $50 or $100 to your credit card payments. Or, you can focus all your payment resources on the highest interest loan until it’s paid off, then move to the next highest for snowballing your way out of debt.
4. Start an emergency fund
The best way to avoid going into debt is to have some money on hand to handle the occasional, yet inevitable, emergency. Most Americans, though, can’t come up with $500 on short notice. Set a specific goal, like adding $50 per month to a savings account. At the end of the year, you’ll have more than $600 available in case something goes wrong.
5. Start a retirement account
You can’t save for what you don’t think about. When retirement is years or decades away, it’s difficult to incorporate thinking about it into your daily routine. If you have a retirement account open, you’ll get monthly statements, which serve as reminders. The challenge, though, is taking that first step. While there are important differences between Roth and Traditional IRAs, either one is better than no retirement savings at all. If your job offers a 401(k) matching program, sign up to get at least the full matching funds amount – it’s free money. Do some research, then open the account that seems like your best option.
6. Automate your savings
Saving money takes willpower. Because it’s hard to practice self-denial on a constant basis, that extra $5 you’ve earmarked for savings can very easily turn into a midmorning coffee. Fighting that impulse to spend is a constant struggle. That’s why it’s easiest to avoid the decision altogether. Change your direct deposit to put some of your paycheck directly into a savings account, where you won’t even think of spending it impulsively.
An excellent automated savings program available at Radiant Credit Union is the Even-Up savings account. With an Even-Up savings account, every time you use your Radiant Credit Union Nickel Back Debit Card, money is transferred to your savings. Check out the details at https://www.radiantcu.org/accounts/debit-card.shtml
7. Get educated
Knowledge is power, and that’s especially true in the world of personal finance. What you know about your money goes a long way toward determining how much of it you get to keep. There’s a lot to learn, but you’ve got a wealth of information at your fingertips. Resolve to read one personal finance article a week. Not only will this give you good ideas for improving your personal financial situation; you’ll also spend more time thinking about your money. That’ll lead to positive results down the line!
We hope you have a safe, happy and prosperous new year!
Your Turn: What resolutions are you making this year? Will this be the year you join a book club, quit smoking or spend more time with your family? Let us know in the comments!