I love a fresh start. I love starting a new job, moving into a new house, or even starting a new activity. Something about that clean slate energizes me and makes me feel like I can change the world.
It’s almost the new year – a fresh start that’s available to everyone.
Whether or not your make resolutions, the start of a new year is a good time to reflect on life and decide if you need to make some changes.
You might want to lose weight, conquer a new challenge, or find love, but don’t forget about your financial well-being! Here are 10 ways you can get your finances in order this new year.
1. Get a Good Bank
It’s easy to get complacent with your banking choice. You probably signed up for your bank years ago, perhaps because it was convenient to your home or to work. But are they still the best choice?
Are they providing good customer service? Do they offer all the features that you need? Most importantly, are you earning a good interest rate on the accounts your have with them?
Make a list of features you need in a bank, and then go bank shopping. Compare a few of the local banks, but don’t forget about online-only banks, which will have the best interest rates because of their low overhead.
2. Put Your Bills on Auto Pay
It’s rare to find bills that you can’t pay online these days. If your bill has the option, set it up to be automatically deducted each month.
This saves you the time of writing the check or logging on to make a payment (and let’s face it, you’ve forgotten the password and it takes 5 tries to log in). Even more important than saving time is saving money; auto deductions mean you won’t have to worry about late fees.
Even if you don’t have online accounts for your bills, your bank probably has a bill pay option that allows you to directly pay recurring bills. (See point #1 – if your bank doesn’t have this feature, you should shop for a bank that does.)
3. Create a budget
Budgets aren’t just for people who are living on a tight income. Budgets are for people who want to achieve their financial goals.
Maybe your goals include paying off debt, or maybe they’re geared toward travel or retirement. Whatever those goals are, you’ll achieve them quicker with a plan. That plan starts with your budget.
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4. Top up Your Emergency Fund
Many financial experts recommend an emergency fund of at least $1,000. If you get a flat tire or your almost-new refrigerator breaks down, where will the money come from?
If you don’t have an emergency fund, the unexpected expense will go on a credit card. If your finances are tight, then you might have a problem paying off the credit card debt.
Before you know it, another unexpected expense comes along, then another, and then another. Eventually, you can’t pay the minimums on your credit card, and your debt will be spiraling out of control.
With as little as $1,000 tucked away, you can prevent that scenario. If you already have a $1,000 emergency fund, challenge yourself to take your emergency fund to the next level. Set aside 3-6 months of your normal living expenses.
This isn’t to cover a flat tire – this is to cover the loss of a job. 3-6 months of living expenses will keep your head above water until you can find a new job or make significant lifestyle adjustments. The bonus is that if you find yourself hating your job, you can rest easy at night knowing that you could quit any time you wanted.
5. Pay Down Debt
Either way, take a deep breath and start tackling your debt. The interest you’re paying on your debt can be better used elsewhere.
If you have a budget (and if you don’t, see #3), find one or two categories that you can eliminate or cut back on. Use that money to start paying down your debt. If you don’t think you can make any cuts, you still have options.
Sell some things, take on a part-time job, or get a roommate. Get creative and remind that whiny voice in your head that this is only for a little while.
6. Contribute to Your Retirement Plan
Many employers offer some sort of match to your company-sponsored retirement plan. If you’re not contributing to your plan or not taking full advantage of the match, change that first thing in the new year.
If you’re already taking full advantage of the company sponsored match, then challenge yourself to increase your contribution by at least a few percentage points.
Often, people think that enrollment in your company 401(k) can only be done during the annual benefits enrollment period. You should check with your employer, because you should be able to sign up for your retirement plan at any point in the year. You should also be allowed to modify your contributions throughout the year.
7. Look at Your Insurance
It’s not a bad idea to check around to make sure you’re getting the best deal on insurance. Investigate your car insurance deductibles and check on premiums. If you own a home, try quoting your homeowner’s policy bundled with your car insurance and without.
For life insurance, the new year is an especially good time to make sure you have enough life insurance for you and your spouse. If you have had any big changes in the past year or anticipate big changes this year, like purchasing a house or having children, you will definitely want to adjust your life insurance plan.
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8. See what it takes to get ahead
If you’ve been on cruise control at work, this is a good time to think about where you want to go from here. Do you want to move up at your current company? What would it take to get ahead?
Do you think you need to look for a new position? Or maybe you think you need to switch career fields altogether.
Make this the year that you earn more money, while finding satisfaction and fulfillment in your career.
9. Clean out your basement
Do you have boxes and boxes of stuff in your basement, attic, and/or garage? Why?
Stop and think about why you’re holding on to all these things. If you can convince yourself to part with boxes of goodies, you might benefit financially. You can hold a garage sale, or, if you have some really nice items, you might consider Craigslist or eBay.
Maybe you go all out and declutter your whole house. You might realize that you don’t need all that space, anyway. You might be pleasantly surprised to find that you could downsize rather comfortably, saving hundreds of dollars a month.
10. Try Making a Sacrifice
Maybe your financial life is more or less in order. You have a great bank, you have an emergency fund, you have a budget, and your insurance is in order. Congratulations! But maybe you can do more…
Challenge yourself to cut down on a category of discretionary spending. You could use that money to put toward a special treat, like a nice vacation, or you could roll it into a house downpayment or your retirement fund.
So think about it. Do you really need cable TV? Do you really need to eat out twice a week? Do you really need to pay to have your dog bathed?
You aren’t writing anything in stone by cancelling your cable package. If you decide you have to watch The Walking Dead with the rest of the world, and not on Netflix a few months later, you can always call up your cable company. They’ll be happy to have you back. But if you can make it without cable, the money in your account will add up quickly
The new year is an exciting time, filled with fresh possibilities. It’s a brand new start. If you’ve been having problems with your finances, this is the year that you can turn things around.
If you have been doing well with your finances, this is the year that you could really kick things up a notch. The choice is yours!
What financial resolutions will you make for the new year? Which ones did you set last year and not achieve? Which did you achieve?