Well, 2017 is over, and I’m probably guessing based on the average population, that you didn’t hit your resolution for last year. Most of us actually give up within the first few months of the year. Take a gym for instance, you see the beginning of the year packed, but as the year goes on you see less and less going, until eventually paying for a membership every month that you don’t use. In the case of your finances, let’s hit the new year running and start on a high note.
Prepare for the Year
The great thing about starting to prepare your finances in January instead of waiting until later in the year is that you have more time to save up for purchases that you plan to make all year, whether it’s for birthdays, vacations you plan on taking, even saving up throughout the year for Christmas shopping money. Starting early will help you feel less of a burden at once, even keeping you from putting on a credit card and falling into debt, paying interest on that balance for months, even years to come.
Set a Budget in Place
Once you have your plans laid out for the year you can start to piece together a budget. You can take note of exactly how much income is coming in, going towards monthly bills, and allocating funds out for food, gas, and spending money. The spending money is where you can look to reduce unnecessary spending. Instead of going out to eat or spending too much on lease payments for nice cars, you can hope to free up extra money each month that you can put towards paying off debt and saving for an emergency fund, and putting funds towards your retirement account.
Give Yourself a Cushion
Speaking of emergency fund, you never know when you have a large unexpected charge coming in, so instead of having to put on a credit card and risk going deeper into debt, if you can put aside a few months’ worth of expenses into an account for easy access, you can give yourself a little cushion in case you have an auto repair, vet bill, or the need for a new appliance come up at some point. Once you have built up your emergency fund you can start contributing even more towards retirement, as having too much sitting there collecting little interest in a savings account would be better spent in a brokerage or retirement account where it can grow more over time.
Save for Your Future
Although you should be saving for retirement all along, I understand that it can be tough to max out when you have debt and no cushion for yourself, as those are priorities as well but there should be a line where you can do both, but as you continue to pay off debt and build an emergency fund, you can contribute even more towards retirement. By increasing even, a percent a year it will help over time without feeling too much impact from your paycheck.