Millions of people across the globe have just made their New Year’s Resolutions and for many of them learning how to manage money better is high on their list - and rightly so. While many people will give up prematurely, some will stick with it and achieve their goals. So, what are the top money-related resolutions? And what is the secret to keeping on track?
Read on to learn more. This article will cover five ways to set up successful systems and habits to achieve your financial dreams.
1. Create a Budget/Track Expenses and Stick with It - For those who have an analytical mind, making budgets and spreadsheets is a joy. But most of the time when the word “budget” is mentioned, it makes people shake in their boots. However, the more you know what is going on with your money, the less it will control you. To get started creating a budget, track what you spend in a month on expenses. From there, create a realistic list of each category you plan to spend money on. This serves as the map - the outline that will tell you where your money is going every month. Once you know these details, it becomes easier to determine how much money needs to go where.
To help yourself create a budget, set a monthly meeting with yourself and any loved ones who need to buy into the plan of action. When planning this meeting, attach a pleasurable experience to it. Make it something fun like a special treat during the meeting or a reward after it’s over. You could go out to get ice cream afterwards or watch a funny movie on TV with low-cal popcorn. Then, to stick with it, make sure the activity is written on your calendar.
Another key to success is making sure your budget is reasonable. If it’s too hard, you won’t be able to stick with it.
2. Start Saving or Save More - Saving money is essential for financial success and freedom. From your budget, allocate a certain percentage of income that will go directly to savings. First, the goal should be to have at least three to six months of your expenses saved. This will give you a cushion in case someone loses a job and there isn’t much income for awhile. Next, you can start saving for different/bigger things such as a car or a house.
Tips for savings success:
Every time you think of spending the money you should be saving, redirect your thoughts to enjoying the thing you are saving for. So, if you want Starbucks coffee but are saving for a new house or a vacation, imagine yourself drinking coffee on your new patio or having a drink on the beach.
It’s also helpful to set up an auto transfer from your checking to your savings account after each pay day.
3. Pay Off Debt - Once you have set a budget, saved and are gaining some traction, it is important to start knocking out debt if there is any. Debt can be the sore that never goes away, and it has and will continue to keep many Americans from accomplishing their financial goals.
Success tip: Dave Ramsey has a great way to tackle debt called the debt snowball. This method encourages people to pay off the smaller debts first so that those little successes fuel the joy you feel from accomplishing something. When you experience a victory, you are more likely to continue the good habits that led to this success.
4. Reduce Expenses/Raise Income Level - Finally, sometimes to accomplish certain financial goals, it takes lowering expenses and raising income levels. Whether that means getting a second job while you're grinding to accomplish these goals, or even changing careers to make more money, increasing your income will help you accomplish your financial goals quicker. Sometimes that means selling items in your home that you could go without, unsubscribing to that massage service or even going without cable for a while. Identifying these items can be done while creating a budget and deciding which items are essential and which ones are fluff.
Keep in mind that you aren’t giving up fun things or working two jobs forever. Giving up these things is temporary and you will soon be able to add them back into your life. And, you will be able to enjoy them guilt free when you can truly afford them.
In conclusion, giving yourself a money makeover may not be pleasing in the moment, but you can do things to make it more rewarding along the way. A bit of discipline, hard work, tough decisions and consistency can make your dreams happen. It may not be easy, but it will be so worth it!