The new year is quickly approaching, so now is the time to start thinking about how you can commit yourself to becoming more financially fit. If you are considering making some New Year’s resolutions to better your money management, it can be overwhelming to know where to start. Here are some tried and true financial New Year’s resolutions that can help you become more organized, more responsible, and more confident with your money:
Before you can improve your financial situation, you need to have a better understanding of exactly where you stand financially. The best way to do this is to map out all of your income and expenses, including any debt that you are trying to repay. This can show you where your money is going and will allow you to target areas of your spending, such as groceries or entertainment, that are excessive. Make a budget and establish goals to ensure that you spend less than you earn.
Go one step further by monitoring how much you spend each month during the new year. Once you have reached your budgeted amount for the month, you’ll need to stop spending in that area. One reliable way of staying within budget is to use the envelope budgeting system, which involves paying cash for all your purchases (categorized in separate envelopes).
Another great financial New Year’s resolution to take charge of your finances is to start saving part of your income each month. There are several ways to do this, but I recommend starting off by setting aside $1,000. Once you reach that milestone, you can take on loftier goals, such as building an emergency fund which would consist of six months worth of expenses. If you already have an emergency fund, you are not off the hook. Continue to save and make it a life long habit by setting aside a certain percentage of each paycheck, such as 10 percent.
Tip: Don’t neglect to contribute to your retirement fund, especially if your employer matches your contributions.
To become debt free is truly the American dream, but for many people, this goal is so far off that it may seem unattainable. Keep in mind that this may be a New Year’s resolution that takes a few years to complete. And if you are in a lot of debt, your resolution can be to reduce what you owe by a certain percentage. Start moving your net worth in the positive direction this upcoming year and stay motivated to become debt free.
Tip: Learn about the various ways to earn extra income from home. For example, you can start your own side business while still working your day job.
There is nothing more rewarding than giving back. Make it your resolution to be a good steward with your financial blessings and start living a lifestyle of charitable giving.
Casey Slide is a guest blogger from the Money Crashers personal finance blog.