When you think about New Year’s resolutions, you probably think about trying to lose weight, quitting a bad habit, or starting something new. What about financial New Year’s resolutions? We all have our own bad spending habits we’d like to curb, and we all want to be richer than the year before, so how can we make sure that we start off the New Year on the right financial foot? By following these Six New Year’s resolutions for a more prosperous 2014, that’s how!
1.) Adjust your budget to avoid lifestyle inflation
Has your income changed over the past year? What about your expenses? Making some adjustments to your budget in the New Year is a great way to keep your finances on track and avoid lifestyle inflation. For the past four years, I’ve been using the same budget template to note my income, expenses, and savings goals. Each time my income or expenses change, I save a new spreadsheet and mark down the changes. I do this so I can easily keep track of my progress throughout the years, and to make sure that when my income increases, so does the amount I put into savings. Similarly, when a new expense pops up, I try to cut out another expense to make it work.
2.) Cut out frivolous spending
The beginning of a new year is the perfect time to see where all your money went the year prior so that you can curb some of your bad spending habits moving forward. For instance, last January I looked through my finances only to find that I was spending way too much money on my morning coffee run. Spending $3 at Tim Horton’s every day may not seem like a big expense at first, but when you add it all up that’s $780 of your hard earned money going towards a few cups of coffee. After that, I made a plan to cut down on this frivolous expense by only treating myself on Fridays, saving me hundreds of dollars.
3.) Start an emergency fund
If you don’t already have an emergency fund, there’s no time like the present to set one up. Instead of relying on credit when your car needs repairs or your house needs some new plumbing, by having cash in the bank to pay for these extra expenses you not only avoid paying interest, but can earn interest on that money too. Just make sure that the money is easily accessible for when you need it, and that it’s in a high interest savings account to help you earn more money.
4.) Start saving for retirement
Retirement may seem like a long way away, but it can take decades for you to save up enough to afford the life of a retiree. Depending on what type of lifestyle you want to lead during retirement, the magic money number you need to save up depends on several variables. Luckily, Service Canada has an easy to use retirement calculator to give you a rough estimate of how much you’ll need to save up. Just remember, the sooner your start saving, the easier it will be in the long run.
5.) Pay off your debt
The holidays are an expensive time of year, but that’s no excuse to let your debt keep accruing more interest. No matter how much debt you have to pay off, you need to make a realistic debt repayment plan with a clear end date. To start off, look into getting your interest rates reduced through consolidation loans, then focus on paying off your highest interest debt first. To give yourself a deadline, and to avoid debt fatigue, give yourself no more than thirty six months to pay it all off.
6.) Set up savings goals
Besides saving money for your emergency fund, retirement fund, and debt repayment plan, what other things do you want to save up for? A home of your own? A trip around the world? A lavish, destination wedding? Whatever your goals may be, it's important to have a clear idea of how much you need to save up to make them a reality, and make sure you keep that money separate from your other savings accounts. Last year I went to Thailand for a month and had my picture perfect wedding, and I was able to afford both in cash because I saved up enough the year before.
Bargainmoosers, what are some of your financial New Year's resolutions for 2014?
(Image credit: bortescristian)