6 Tips to Start the New Year on the Right Track Financially
The holidays are a time of hustle and bustle. Between the parties, presents, and meals, other things often shift out of focus. But the new year is a time for refocusing on your goals.
Whether you went over budget or just didn’t pay attention to your spending over the holidays, the new year can be a great time to get back on track financially.
Here are six tips to help you start the new year on the right track financially:
1. Set Goals
This time of year, people set resolutions for things they want to do or not do in the new year. While it’s great to want to change things, research suggests that only 9% of people who make New Year’s resolutions actually complete them. This is because resolutions aren’t always clear enough, and there is no path forward.
Instead, set goals to start the New Year on the right track financially. To make your goals effective, create SMART goals. These are goals that are specific, measurable, attainable, realistic, and time-based. When a goal has these five elements, you have a clear path forward and understand what is required to achieve the results you want. This can help you stay focused and keep you on track.
Let’s look at the difference between a resolution and a goal. A financial resolution could be, “This year I will save money for a vacation.” This gives you no direction and no way to see if you’re on track.
Instead, if you turn it into a goal, it could read, “I will save $1,500 for a vacation in June by saving $300 from my paycheck into my savings accounts each month from January to May.” This goal is much clearer, with a set amount to contribute on a schedule and a time frame for completion.
Setting SMART financial goals like this will help you start the new year on the right track.
2. Know Your Numbers
After the holidays, the last thing you may want to do is sit down and look at your accounts. But knowing your numbers is a great way to go into the new year informed. So, as the new year gets underway, grab a cup of coffee and your bank and credit card statements, and get to know your numbers.
First, while it’s not a fun number to look at, it’s important to look at your debt.
Whether one of your goals for the year is to reduce or eliminate your debt or just to stay on track with payments, you need to know where your debt is and how much you owe.
- Make yourself a list that includes what the debt is, who you owe, what the minimum monthly payment is, and when it is due. This will help you stay on top of each individual debt.
- Then, add up your debts to get your total debt number. Try to approach this number from a shame- and judgment-free perspective. The money has been spent, but knowing how much you owe can help you make a repayment plan.
Once you know your debt, review your income.
Look back over three to six months of pay stubs to see how much you earn each month. If you get a salary, this will be easy because your monthly income will be consistent. If your income is variable, you’ll want to add up your income over the time you are considering, then take an average to get the approximate income you earn each month.
Starting the year off knowing how much you earn can help you set realistic goals for spending, saving, and paying down debt.
3. Create a Spending Plan
Another tip to start the new year on the right track financially is to set up a spending plan.
First, find your typical expenses by reviewing three to six months of your bank and credit card statements. Some expenses that are fixed will be the same each month. These are easy to include in the spending plan. Other expenses that vary from month to month can be trickier. Take an average over the past three to six months to see what a typical month looks like. Be sure to include debt repayments and any saving or investing you regularly do.
Then, compare your income to your expenses.
If you have money left over, you can put it towards your goals. If you don’t have money left over, you’ll need to see if there are expenses you can reduce or cut entirely.
You can also look for ways to increase your income, like getting a raise at work, finding a part-time job, or starting a side hustle.
The goal of your spending plan should be to cover all your necessary expenses and the optional expenses that matter most to you.
4. Make a Routine
Now that you’ve set financial goals, gotten to know your numbers, and made a spending plan, you’ll want to create a routine to keep tracking your spending. Having a routine will keep you on track. Some people only want to check in with their money once a month. But if once a month doesn’t feel like enough, try checking in once a week.
Whatever frequency you choose, put it on your calendar. Plan on twenty to thirty minutes when you know you’ll be free and can focus on your money. Then, just like you’d keep an appointment with your doctor, dentist, or a friend, keep your personal finance meeting with yourself.
Sit down and review your spending to see if you are on track. Then, look ahead to see what expenses or activities you have coming up and make sure you have the funds available to meet them.
Consistently checking in with your money will help you work towards your financial goals and live within your budget.
5. Check Your Account Information
Another tip to start your new year on the right track financially is to check all your accounts to be sure your information is accurate.
Update any information that may have changed during the year, like your address, phone number, or email. You should also check the beneficiaries on your accounts to confirm that you have named someone to receive any funds in your account if you die. It’s important to have beneficiaries named so that your accounts are distributed according to your wishes if something happens to you.
6. Check Your Credit Report
At the start of a new year, checking your credit report is another way to make sure you’re on the right track financially. Your credit report will show past and current accounts, loan information, your payment history, and personal information. Reviewing your credit report will show you what lenders see when they check your credit to approve you for a loan or a credit card. It also allows you to find inaccuracies and get them corrected.
There are three credit bureaus that report your credit report: Equifax, Experian, and TransUnion. You have the right to request a copy of your credit report from each of the three credit bureaus once a year. It can be helpful to pull your credit reports before you make a big purchase to be sure everything is in order. But if you aren’t planning any big purchases, the new year is also a good time to check your credit reports.
It’s important to note two things about your credit report. First, it will not have your credit score on it. Second, it is free to get one copy from each bureau each year. You can request your credit report by visiting www.AnnualCreditReport.com, calling 1-877-322-8228 (TTY: 1-800-821-7232), or filling out the Annual Credit Report request form and mailing it to: Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281.