Now that a new year is underway, it’s a great time to consider revamping your finances. If last year didn’t quite go as expected in terms of your personal finances and watching your budget, then it may be worth building out a new plan this year.
It can definitely feel overwhelming at first when you confront your finances — the good, the bad, and the ugly. But as you set small goals and plan out a smart budget, it gets easier along the way, and your bank account will be happy in the long run.
If you’re ready to make 2019 the best year for your finances, you should test out a few different goals and plan of actions to see what works best with your lifestyle — you can always switch things up depending on how you’re living at the time.
As the Saying Goes… Less Is More
One of the key components to balance your finances is being able to live on less than you make. Sometimes, people get into a mentality that because they make a certain amount of money, they need to spend huge portions of it at once or make a large purchase that they’ve been eyeing for a while.
While it may be difficult to resist impulsive shopping or living outside your means, it isn’t as hard as you think if you set a realistic budget that you can stick to over a long period of time. Start off by allocating a specific amount of funds that are dedicated to the “must-haves” in your life such as groceries, rent/mortgage, car payments, and insurance. Next, you’ll want to have a separate fund for personal fun — this is the most critical part of saving; you don’t want to go overboard with your budget, but you also want to make sure you’re holding yourself accountable to a viable goal.
If you struggle with writing down a budget in a planner or spreadsheet, there are ways to help you stay on track. Mint is a great tool that can alert you if you get too close to your spending limits, and it also allows you to easily see where your money is going.
Ditch Your Debt and Woes
Ah, debt. It can be both frustrating and discouraging seeing your hard-earned dollars go to paying off student loans or looming past purchases. One of the best ways to kick off your financial resolutions is by eliminating your debt once and for all so that you can free up incoming cash flow for savings or other accounts.
Unsure of how to take the first step? If you’re worried about your student or mortgage debt, it’s encouraging to know that no matter where you currently stand in terms of how much debt you’ve racked up, you can likely refinance your loans to potentially secure a lower interest rate. This will help you in the long run as you allot a certain amount of money to pay off your debts in small chunks each month. By paying off your debt in smaller amounts, you’ll be able to build momentum, and by the end of the year, you’ll have made measurable progress.
You can also score on your taxes if you have student loan debt. Yes, you heard that right — when you start repaying your loan, a deduction is available for the interest payments! Even though the amount is limited to up to $2,500 of student loan interest paid each year, and you can only deduct the interest on student loans you used to pay school-related expenses, you’ll likely see a larger tax refund headed your way. And since tax season is right around the corner, using tax prep companies like TurboTax will help you find deductions that you can take advantage of.
Build Your Foundation with A Backup Fund
It’s no secret that things come up in life that are often completely out of your control and tend to cost more money than expected. An easy way to lessen the financial burden of these times is to get a head start on an emergency fund.
You may be wondering how much you should be saving for your fund, but what it boils down to is taking a look at your monthly gross income and divvying your money in a way that feels reasonable to you. If you’re only able to contribute $50 per month towards your backup fund, then that’s exactly how you should start. There’s no “set” amount that you should be saving since it depends on your financial situation, but in general, it’s recommended that you’re saving two times your monthly rent in an emergency fund at all times.
If you’re worried that you won’t have the willpower to move your money manually into the fund, you can set up a separate account with your bank with automatic transfers so that you don’t even have to think twice about adding to it.
Starting from scratch? With tax season coming up, take advantage of your tax refund and begin building your emergency fund. Even if you’re only using a couple hundred dollars, you have to start somewhere, and you’ll feel better knowing you have a backup plan in case there is an emergency and you need the extra cash.
Share your best money tips with us @BritandCo.
(Photo via Getty)
