New Year's Resolutions: 5 Suggestions for Managing Your Finances |
Posted: January 3, 2018 |
When it comes to personal finance, many Americans receive a failing grade. More than half of Americans would have trouble coming up with even $500 in an unexpected pinch. With the New Year comes the opportunity to rethink family finances and to set up some resolutions that can help you improve the financial standing of your family. Here are five that could help. Set SMART GoalsThe word smart in this instance is an acronym that stands for Specific, Measurable, Achievable, Realistic and Time-Bound. This is a popular formulation that businesses use to keep their goals on track. Realistic, achievable and measurable goals are much more likely to be met than those that are more ethereal and extreme. For example, it's pretty much impossible to save $1 million in a year on a salary of $50,000. On the other hand, it's possible to achieve and measure savings of $1,000 to $5,000 on such an income. Start BudgetingIt's hard to have a handle on personal finances when no one knows where all of the money went at the end of the month. Most people hate to hear the word budget, as the word itself carries a connotation that's very constraining. Some personal finance gurus have opted to call budgets by the more empowering title of the spending plan. The idea behind this subtle change is the belief that a spending plan allows users to "tell their money where to go" according to Dave Ramsey. Looking at expenses can be a good way to find areas that can get cut. Perhaps doing away with cable or finding cheap auto insurance could provide a needed boost. Of course, it's important to decide to put some of the money in the budget toward long-term savings goals, which brings us to the third point. Pay Yourself FirstMost people come at their finances and pay all of their bills first. Then, they attempt to save what is left over, which can frequently be nothing. Paying yourself first means that the first bill of the month goes toward a savings account or a retirement fund. If it's the first money that comes out of your checking account each month, it makes it more likely that you'll keep up the process. You don't actually see the money, so it's like it's not even there, except in the funds that are slowly building up momentum and wealth. It might take some creativity to pay some other bills, but it will be worth it when you look at the stash that you can build up over time. Automate As Much As PossibleWith online banking and automatic bill pay, it's never been as easy as it is right now to make sure that all of your financial goals are met. There are also online budgeting apps like Mint and Personal Capital that can track income and expenses on a monthly basis. It's even possible to automate your savings. Many, if not most, major employers in this day and age offer direct deposit for their employees. Take advantage of this option. Many HR departments allow for employees to split up what accounts their income go into. If you have an IRA or a taxable investment account set up, make sure to have some money go into them each and every paycheck so that you can build wealth over time. This is part of the paying yourself first goal mentioned above. Re-evaluate Your ProgressIt's estimated that about 8 percent of New Year's Resolutions actually get kept, which means that 92 percent of people fail. This is where some re-evaluation can come into play. Set up a time around April 1 or June 1 to see how you're going at the quarter or halfway point of the year. If you're keeping up with the resolution, this should keep you motivated. If not, looking at how you're doing can bring back some motivation. Small improvements over time can make a big difference when it comes to your family's finances. Setting achievable goals at the turn of the New Year can be a great opportunity to start these improvements. Strive to keep up with them, and try to re-engage if you run off the track a little. Your future self will be glad that you did.
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