5 New Year’s Resolutions for Better Personal Finances
Take control of your money in 2016 with some resolutions that you’ll be able to keep…
Do you plan on making New Year’s resolutions for 2016? If so, this probably won’t be your first time. Making the promise to yourself is easy. Keeping the promise is what’s hard. So here are five simple resolutions you can make — and keep — to have better finances in the new year.
1. Ask Yourself, How Did I Get Here?
Your present financial situation is the result of decisions both great and small. Sure, that auto loan helped put you further into debt, but so did your daily dose of caffeine from the Starbucks near your job. Before you can get to where you’re going, you need to understand where you came from.
Go ahead and perform a personal financial inventory. List out all your loans and your credit cards. List out your expenses like rent, utilities and insurance. Hold off on making a budget for now and instead draw up a map of how you already spend money. Request a copy of your credit report–you are entitled to one free report per calendar year–and be sure to look for any errors. Gather all of this information together to paint an accurate portrait of how your finances got to where they are.
And now that you’ve got all that information, keep on top of it! Make a spreadsheet and update it on a weekly basis.
Well, not exactly. There are certainly people for whom their gym time is key to both their physical and mental well-being. For these people, the money they spend on their gym membership is money very well-spent.
But these people are not everyone. There are lots of people who have a gym membership and use it only sparingly or perhaps not at all. While getting into shape and taking care of yourself are important, so are getting your finances into shape and taking care of your debt. The money spent on that membership could be money spent paying down a high interest credit card.
The same applies for all your unnecessary expenses. Trim down your spending on stuff that you don’t need or don’t use enough to make the cost worthwhile. That wine-of-the-month club is great, but you can live without it. That money would be better spent investing for retirement or getting out of debt.
3. Trust the Computers
Technology has made a lot of stuff easier, from writing correspondence to listening to music to wildly misdiagnosing your cough symptoms as lupus. It’s also made paying your bills and keeping on top of your finances far more manageable than it was in the past.
Most online banking portals have an option for auto-paying your bills. This is a great idea for anyone who has trouble remembering which bill goes on what date. When you have multiple cards and personal loans and rent and insurance and utilities it really adds up. Set up automated bill pay to make sure that you don’t encounter any late fees or dings to your credit score from paying late.
(Another, less technological, way to cut down on your due dates is to consolidate your debt onto a single loan or credit card. This has the added benefit of possibly giving you a lower interest rate in addition to only one or two payments per month.)
4. Don’t Trust the Computers
The downside to all the ease that technology offers is the vulnerability of your personal information. It’s not exactly Skynet and the terminators, but having your identity stolen can feel just as devastating.
Take precautions to protect your information. For instance, though it might seem annoying, you should create different passwords for all your different accounts. That way, even if one account gets hacked, the others will remain secure. Dealing with ill-gotten purchases on one credit card is bad. Dealing with those same purchases across three cards is much worse.
Another precaution is to change your passwords regularly. Again, this will probably seem annoying. Keeping all those passwords straight will be a hassle. But it’s worth dealing with that hassle if it means that your information and finances are more secure. Get a pen and paper, write your passwords down and keep that document in a safe place.
5. Be Specific
This is less of a resolution and more of a method for making other resolutions. Rather than making a vague resolution like ‘pay off my debt,’ make a concrete resolution like ‘pay $300 more per month towards my credit cards.’ Break down the process of improving your finances into manageable chunks. Be specific about where you are going to cut back your spending and how much you are going to save or invest on a regular basis. New Year’s resolutions are a promise. Help yourself keep that promise by making a plan.