04 Jan Financial New Year’s Resolutions for 2016
It’s a brand new year, and with that always comes the hubbub of self-improvement. We have a challenge for you: This year, don’t overwhelm yourself by trying to improve every single aspect of yourself. (Really, though, you don’t even need any improving.)
Instead, let this year be your year of financial stability. Focus on improving your personal finances with these 4 financial New Year’s Resolutions.
- Stop overspending.
Living paycheck to paycheck is stressful. Here’s a four-step guide to help you accomplish this resolution:
- Write down everything you spend. Keep a spending journal for one month. Similar to how people on a diet keep a food journal, you want to start off your finance journey by keeping track of every single thing that you spend money on. Don’t make any changes quite yet–simply document all of the things that you buy this month.
- Cross out every item in your journal that wasn’t a necessity. Get out a giant red marker and really have at it. Stopped by Taco Bell on your way home from work one day because you really weren’t feeling those leftovers in your fridge? Cross it out. You can deal with leftovers if it saves you $10+ each time you eat them. You’re practically getting paid to eat them!
- Create a list of your required monthly expenses. Unfortunately bills have to be paid. Write all of them down (rent/mortgage, car, utilities, student loans, etc.) and how much you spent on each during the month that you were recording all of your expenses. Calculate how much you have leftover after all of your bills are paid.
- Give yourself an allowance and put the rest in savings. Never spending money on anything extra except for your bills is an unrealistic expectation. There will be times where you will need to go out to eat (with friends or because of an unexpected event taking place one night) or will simply want to buy something for yourself. Take a percentage of how much you have left after bills and save the rest.
- Make a plan to get out of debt.
You may not get fully out of debt in 2016. Some of us simply have way too much debt for that to be a realistic resolution. But if you make a plan and set a deadline for when you will be officially debt-free, you’ll have that much more of an incentive.
- Write down your different loans and how much you owe on each.
- Focus on paying off your loans with the highest interest rate first.
- Calculate how much more than your minimum payment you can afford to pay each month.
- Improve your credit score.
In the event that you do need to get a loan or buy a car or a house, then you will want a good credit score. Even if you don’t plan on making a large purchase or getting a loan, having a good credit score is still an excellent bragging point. Follow these tips to improve your credit score:
- Pay off your credit card(s). One of the highest impacts on your credit score is your credit utilization (how much of your credit you have used out of how much credit you actually have). So, although it helps your credit score to have credit cards open, you don’t want to rack up a large credit card bill or it will greatly affect your score.
- Pay all of your bills on time and don’t let anything get put into collections or you could get a derogatory mark on your credit report.
- Don’t open a lot of new accounts or else your average credit history will decrease. For a good score, you want to have a long history of credit.
- Grow your savings.
A savings account is a necessary thing to have in the case of an emergency. Say the water heater in your attic springs a leak and you have to buy a new one immediately so that you don’t get a large water stain in your ceiling. If you have no savings, then you have to scramble to get a loan or put it all on your credit card. And neither one of those options is a financially good idea. So you want to have a good amount saved up so that you won’t be stressed when things like this happen.
- Follow the instructions in resolution number one and put aside a percentage of your leftover paycheck each month.
- Find and use a tool like Digit to help save money for you without you needing to even worry your little head about it.
Make 2016 your year. Save money, stop overspending, and make a plan to get out of debt.