The start of a new year is a great time to reflect on the past 12 months. It also provides an excellent opportunity to overhaul your life for the better, especially when it comes to getting you closer to your money goals.
Whether you want to increase your retirement savings or pay off your debt, if you want to change your financial circumstances, now is the time to do so.
Make a monthly budget
No more excuses. You must have a budget to keep track of your spending. To start, create a list of your fixed expenses, like your car payment or home loan. (Tip: include retirement and other savings as part of your essentials). Next, add your non-essential expenses, or nice-to-haves, such as subscriptions. Your spending habits should not determine your budget. Instead, your budget should determine your spending habits.
Reduce your expenses
Now that your budget is in place (and you’re recording every transaction you make), you’ll be able to see where you can cut back on your expenses. You might be shocked to see how much you spend on things you don’t really need. It will also flag debit orders going off your account that may be redundant – and if so, stopped.
Get on top of your debt
Commit to clearing your short-term debt. You can choose to pay down balances by focusing on the higher-interest debt first, or pay off the smallest balance first and then snowball your payments into the rest. Think about it: if you stick to this resolution, you may not have to make it again next year.
Review your insurance
This is a must-do every year. Take a closer look at your insurance to ensure you have adequate coverage for the essentials: your health, car, and home. Consider also looking into disability insurance, an umbrella policy if you have significant assets and life insurance if you have dependents.
Build an emergency fund
Bad things can happen to anyone, whether an illness or the loss of a job. To protect yourself, build an emergency fund in a separate savings account to cover three to six months of essential expenses should the worst happen. So, the sooner you get one started, the better.