The turning of the calendar into a new year gives many people the illusion of a fresh start. When the new year comes, they are going to eat better, exercise more, be kinder, and manage their money better. If these people are anything like me, these resolutions don’t always last through January! However, financial resolutions make a lot of sense. Thanks to our tax season, in a lot of ways it makes sense for our finances to run on a yearly schedule. The secret to making these resolutions really last? Instead of just setting lofty goals, like wanting to save enough to retire or for a down payment, the key to success is deciding on what simple, concrete habits you can acquire to improve your financial health. Goals without plans are just dreams. The following habits can help anyone, no matter their financial literacy, improve their money management skills and help them meet their money goals for the year!
Track Your Spending
The most basic and important things everyone needs to know? Where their money actually goes. Most budgets fail because people vastly underestimate how much they spend on variable expenses like gas, dining out, streaming services, groceries, clothing, entertainment, and, for parents, kid-related expenses. So before you even think about budgeting (and you should, just not yet) spend a month or so just observing your spending patterns. Regular expenses that occur every few months or even yearly (like buying flea medication for pets or paying for car registration each year) are often forgotten and can upend a carefully planned budget. One easy way to do this is to try to only use one debit or credit card for the majority of your spending, so all the data is in one account. Many banks and credit card companies have the capability of categorizing your spending, so you can see pie charts and graphs on how much you spend on eating out, transportation, and other categories. There are also apps that track your spending. Mint is a perennial favorite among personal finance bloggers and podcasters. It’s free, powerful, and allows you to track your spending across various banks and credit cards all in one place!
Listen to Personal Finance Podcasts
An absolute truism? No one person knows everything. This is especially true when it comes to money management because new laws, tax codes, and products offered by banks, brokerages, and other financial institutions regularly change the playing field. Also, people with different life experiences often have ideas and viewpoints that have never occurred to you but could help you save money or reach your goals faster. Subscribing to a financial podcast on your favorite podcast app is a great way to learn all sorts of new money management ideas, and to keep abreast with how to cope with things like inflation. Some favorites?
Set Your Spending and Savings Goals
Now that you know where your money is currently going (and maybe you’ve picked up some great tips from your new favorite podcast!) it’s time to set some goals. There’s a variety of good apps that help you decide how to spend your money. Many of these apps encourage you to make a spending plan versus a budget. What’s the difference? A spending plan accounts for the money you currently have on hand, whereas a budget typically looks at all the money you expect to have over the course of a month. There are a variety of apps to help you with this, ranging from those with free versions (Toshl) to perennial paid favorites like You Need a Budget (best known as YNAB). Both of these apps will ask you to give each dollar in your possession a job. It also encourages you to incorporate saving for occasional expenses into your normal paycheck distribution. Spending plans encourage people to treat their savings goals like they treat other bills, which helps them turn their goals into reality. Are you unsure of what your goals should be? Try a program like SmartAsset to help you understand how much money you’ll need for retirement or to help your kids go to college, and how much money you’ll need to save to achieve those goals.
Once your spending is well tracked and planned and you’ve got a good start on your emergency fund, it’s time to start investing! The first thing you should do? See if you have any money you’ve already invested and accidentally abandoned. In the summer of 2021, it was reported that around four trillion dollars lay abandoned in old 401(k)s and other retirement accounts. There are a few different methods for you to check to see if you have an abandoned retirement account, and if so, how to roll the money into an IRA (individual retirement account) you control. Next, determine if your employer offers matching contributions if you invest through their retirement plan. Never turn down a guaranteed return on investment! At the very least, try to invest enough to earn the full match offered by the employer. The next account you should open? A traditional or Roth IRA. Traditional IRAs defer your tax liability until you begin drawing out the money in retirement, Roth IRAs let you deposit money you’ve already paid taxes on, meaning withdrawals are tax-free. Finally, you should decide how to allocate your contributions. Most people have the option of investing in stocks, bonds, equities, mutual funds, or exchange-traded funds. Online calculators help you decide how you should allocate your money, based on your age and tolerance for risk.
Work On Your Credit Score
Credit scores have power over our lives. Sometimes employers run them as part of a background check, and they determine what credit is available to us and at what interest rates. Everyone can benefit from raising their credit scores. Some apps already mentioned, like Mint, include credit score monitoring. Just keeping an eye on your credit score will help you identify if something goes wrong, like if something is incorrectly reported to a credit bureau. If your credit needs work, paying down balances on existing credit lines has a huge impact on your score. Making sure that every account is paid on time is also key to having a great score. If your credit report is thin, try adding new accounts. People with limited credit can often still successfully get a credit card to help them build up their score. If you have negative entries on your report, try for a secured card. However, be careful not to apply for too many cards at once. Each inquiry on your report causes a small ding. Space out your applications!
Incorporate Some Savings Hacks into Your Daily Life
One way to improve your money situation? Spend less of it. What you shouldn’t do is try to incorporate a lot of new saving hacks at once. Instead, pick two each month and work on incorporating them into your everyday life. It’s okay if some don’t work out! Once those habits are second nature, add in some new ways to save into your routine.
- Find cheaper car insurance. Now, make sure each policy is comparable (same coverage, same deductible), but often it’s possible to find a better rate than you are currently paying. If you are happy with your insurance company, contact them and ask them to match the rate you were quoted by another company.
- Use a program like Truebill to find every subscription you pay for and cancel any you don’t use or don’t enjoy.
- Scan your grocery store receipts into a program like Ibotta to earn cashback.
- Use sites like Poshmark to sell clothes you or your family members no longer wear.
- Always carry a water bottle with you so when you get thirsty, you don’t have to pay for a drink.
- On a related note, making sure you have a protein bar or other easy snack in your bag or car helps eliminate costly trips through the drive-through when hunger strikes while you are out and about.
- Make eating out a treat instead of a regular occurrence.
- When cooking, regularly make double what you need and freeze half. This helps cut down on delivery and takeout costs on the nights you don’t feel like cooking.
As you set your financial resolutions for this upcoming year, remember that TitleMax is here to support you in the event of unexpected financial emergencies. Our range of alternative lending options may be the right solution as you work through financial hardships. We are proud to offer car title-secured loans and pawns and personal loans to our customers to help them keep their financial goals on track.