Ah, another new year. A time of renewal, re-commitment, and new ideas. It’s a new year, chock full of possibility. We all get excited in the early months of a new year to get ourselves in shape and it follows that we should take advantage of our beginning-of-the-year enthusiasm to get our finances in order too.
Follow these 15 easy steps to getting a grip on your money early on in the year, making the coming year your best financial year ever!
1. Update Your Budget
As with all things personal finance related, it all begins with the budget. Although budgeting is daunting to most, it’s a very simple concept.
Make two columns: with all the money you’re expecting to flow into your house in the first column and all the money you’re expecting to flow out of your house in the second column.
Add up both columns and then subtract the sum of column 2 from the sum of column 1. You should still have a positive number. If not, tweak your numbers until it works. If you need some additional help on making a simple budget using Excel.
2. Update Your Debt Reduction Plan
Once you have a balanced budget, make sure you have a line item in column 2 for paying down your debt. Also, make sure that your plan includes enough money that you make a dent in the debt and while you’re at it, make sure your budget ensures that you don’t accumulate any new debt.
In practice, that means that you have your entertainment and household items thoroughly covered as budgeted items.
Like to travel? Make sure you’re putting money aside for that too so that it doesn’t end up costing you 19% interest.
3. Assess Your Family’s Needs
Take a look at your family’s dynamics and assess if any money needs to be earmarked for upcoming needs. For example, is your child on the cusp of graduating high school? If so, college tuition is looming, so make sure it’s covered.
Don’t forget about your parents in this exercise. Your aging parents may need your financial help soon, too.
4. Gather Your Tax Receipts
Tax season is just around the corner. Why not get proactive about making sure you’ve gathered all the receipts and paperwork you’ll need to make filing this year’s return less “taxing”?
5. Open A 401k Account
If you don’t already have one, talk to your human resources department and make arrangements to open a 401k account. Money in a 401k is invested for you, you usually have a say in how risky the investment is that it’s held in, and the money is only taxed under certain withdrawal circumstances.
There are other advantages too, including the fact that it’s automatic, so the money just accumulates in the background, and some employers offer a matching program, so your money accumulates even faster.
6. Maximize Your Contributions
Once you’ve opened the account, make sure you’ve maxed out your contribution to the best of your ability, especially if your employer is matching a percentage of your contribution.
7. Assess Your Investments
Look at where your money is currently invested. Take a good look at the level of risk you’re assuming with your investments and make sure they still jive with your current situation.
For example, if you are very close to retiring, make sure you reduce the level of risk you’re investing in. Maybe a high-risk investment was appropriate when you first started investing, but you certainly can’t afford to gamble with money you may need in just a few short years.
Contrarily, if you’re just starting out in your career and retirement is still years ahead, now’s the time to invest in those heavy-hitting funds that you’ll be holding for the long-term.
8. Update Your Financial Goals For The Year
Challenge yourself. Make goals and hold yourself accountable to them. Check out this awesome guide to making goals you’ll be sure to achieve for 2020.
9. Assess Your Household Vehicles
Take a good look at your vehicles and assess how much longer they’ll be good. Don’t let a major breakdown catch you by surprise. Put money aside on a regular basis that’s in line with your vehicles’ maintenance needs.
10. Assess Your Credit Cards
Are you getting the most out of your credit cards? Today’s competitive credit card market means that more than ever, we can benefit from using them. Take a look at the cards in your wallet and make sure you’re earning some awesome rewards instead of just accumulating crippling debt with them. Compare credit cards here and make sure you’re maximizing your cards’ potential.
11. Buy Life Insurance
Is your family covered in the case of the worst-case scenario? Too often, the answer is no. Take some time to assess your family’s life insurance needs and call an insurance broker today to find the best policy for you. If you’re healthy, most coverage is reasonable. You should also never underestimate the value of peace of mind.
12. Dump Unnecessary Insurance
Review your loan documents and make sure you aren’t paying for unnecessary life insurance or loan balance coverage. In most cases, the additional insurance is automatically added to your loan or mortgage agreement and must be waived by you.
If you didn’t sign on the waiver, you are paying for insurance coverage that you don’t need. In most cases, this additional coverage is very expensive, only covers a specific portion of your loan, is less beneficial over time, and in some cases, duplicates coverage you already have.
Also, make a quick phone call to some insurance companies and comparison shop your vehicle and household insurance policies. You may be surprised to find that, even when you take into account the multi-policy discount, you may realize savings by splitting up your insurance policies or by changing companies. Maybe your current supplier is willing to give you a discount in order to keep your business.
13. Commit To 3 Cost-Cutting Measures
Take a closer look at column 2 of your budget and look for ways to cut the costs of running your household. Try to find 3 places where you could potentially cut costs. Consider things like alternative sources for your television entertainment, utility saving measures, coupon clipping at the grocery store, or reducing your entertainment costs by eating more meals at home.
14. Clean Out Closets
Believe it or not, there are many financial benefits to doing a thorough closet clean-up. You may rediscover old favorites that can still be worn or jewelry that is suddenly back in vogue.
Also, if you have children, certainly they’ve outgrown last season’s stuff. Take all your children’s outgrown clothing and outerwear to a local consignment boutique and believe it or not, you may make enough to finance this coming season’s wardrobe for your little ones.
15. Get Rid Of Household Clutter
In the same vein, register an eBay account and start selling all your unwanted household items online. Not only will your house feel less messy, but you’ll be able to give your savings or debt reduction plan a little boost.
So, it’s going to be a good year! These simple assessments and tweaks to your monetary affairs will have a lasting positive effect on your financial health throughout 2020.