Are you one of the many Americans who sets a money goal as your New Year’s resolution? As a financial coach, many people come to me with money goals in mind, from paying off debt to saving money for retirement. The truth is many people may have the same goals, but everyone works towards achieving them differently.
Sometimes managing personal finances can be overwhelming. With a bit of planning, some good advice, and self-discipline, you can be well on your way to achieving your financial goals this year.
Set realistic financial goals
Keep your goals manageable and avoid procrastination by making sure that your goals are realistic. If you want to save more for retirement, write down how much you want to contribute to your retirement accounts this year.
If your goal is paying down student loans or other debt, decide how much you can realistically pay off this year and work it into your monthly budget. Setting unrealistic goals may result in spending more than you can afford, which is a dangerous cycle to fall in to.
Evaluate last year’s bills
Determine which months were the most expensive last year for bills and why. Did you have any expenses like insurance or property tax that you didn’t plan ahead for? Did you leave the lights on more in July or crank up the heat in January? Determining patterns in your behavior and spending can help you figure out how to better plan this year on regular expenses such as insurance and utilities.
Set and track your budget monthly
By now you probably know some budgeting basics, and you know how to budget for the necessities like housing and groceries. Where many people mismanage their budget is when it comes to incidentals like doctor and dentist visits, routine car inspections and new clothing for themselves as well as the family.
If you’re a visual person, use budgeting software, like Mint or YNAB to help you see exactly where your money is going. If you’re unsure about budgeting, consider consulting a financial coach to help you set a budget.
Set up an emergency savings fund
Always keep in mind that emergencies are usually unpredictable. Unplanned medical bills, car repairs, or home repairs are just some examples of when an emergency fund might be needed. You need between three to six months of take-home income set aside if you have a reliable income, and nine months of take-home income set aside if you own a business or have a variable income.
One of the best ways to start an emergency savings fund is to set aside a small amount each month – even $50 a month can add up to a lot over a year. If you struggle with the temptation to spend this money, consider setting up your emergency savings at a different bank than your checking account. Out of sight and out of mind may be just what you need to let your emergency fund accumulate and gain interest until you need it.
Set up separate savings accounts for different goals
Determine what you’re saving for up front, such as a new house or a college fund for your child. Set a realistic goal at the beginning of the year as to how much you want to save and break it down into monthly or biweekly amounts that coincide with your budget and paycheck.
Always shop around to save on services
You may yourself needing the unplanned services of an exterminator or a plumber. Unfortunately, sometimes people end up spending more money than they should have because they didn’t compare prices. Read online reviews or ask friends and family for a referral, especially if you’re unfamiliar with the company. Always get multiple quotes so you have something to compare.
De-clutter and get rid of excess
Less stuff means less stress, and downsizing after Christmas is an especially good idea. Donate used clothing, books, or toys to charities and shelters. As part of your budget, set aside only a small percentage (5-10%) for pleasure spending, and stick to it. This can help reduce the accumulation rate of more clutter.
Look for coupons online
It’s easy to find discounts for almost anything from groceries and kitchenware to dinners and hotels with websites like Groupon. Cash back websites like Ebates help shoppers save by giving them a percentage of their purchase in cash back. So before you buy anything online check for discounts, deals, and savings – avoid paying full price at all times.
Buy secondhand
This doesn’t always mean shopping at thrift stores, although that’s a popular option. If you’re not a thrift shop fan, consider swapping clothing or books with friends. Hold a “Swap, Not Shop” party for clothing, jewelry, kid’s sports equipment, or any other items you can trade. I personally love buying kid clothes for my daughter at a local consignment sale, purchasing books at Half Price Books, and trading accessories with friends.
Have multiple streams of income
Traditionally people have always worked one job, but that’s becoming a thing of the past. Entrepreneurial mindsets and economic changes have started a trend of people having multiple incomes. What are your skills or talents? Is there a hobby that you could leverage to make some extra money? Put those skills and hobbies to good use be getting a “side hustle”. When possible set up your side hustle online or from home; you’ll save money on gas, lunches, and travel expenses.
About Your Richest Life
At Your Richest Life, Katie Brewer, CFP®, believes everyone should have access to financial resources and coaching. For more information on the services offered, contact Katie today.