The new year allows you to review money management strategies and set new financial goals. Evaluating and adjusting your saving and spending habits can go a long way in helping you hit your targets.
If controlling your finances seems overwhelming, don’t worry. Forming a solid plan and sticking to it is half the battle. To get started, follow these tips to manage your money better this year.
Create and Follow a Budget
Creating and following a budget allows you to track your income and expenses and identify savings potential. To get a clear picture of where your money goes, record precisely what you spend daily on a digital spreadsheet in an app like Mint or a notebook.
Organize your expenses into mortgage, utilities, car payments, insurance, gas, food, pets, and entertainment. Next, look for and cut unnecessary spending and channel extra money toward your financial goals.
You can use the 50/30/20 budgeting model by allocating 50% of your net income for needs, 30% for wants, and 20% for saving and paying off debt, according to NerdWallet.
Set Savings Goals
You must set savings goals if you need a down payment for a house or car or want to take a vacation.
Create a recurring transfer from your paycheck into a savings account. This is a simple way to set money aside before you have a chance to spend it. Learning to live with what’s left helps you reach your financial goals and realize your dreams.
Resist Impulse Buys
To manage your money wisely, resist impulse buys. Just because you love a pair of jeans doesn’t mean you have to grab them off the rack and take them home. This kind of spontaneous spending quickly adds up.
When you do make unnecessary purchases, keep yourself in check by putting the amount you spent into your savings account. It takes discipline, but if it helps you spend less or save more, it’s worth it.
Establish an Emergency Fund
A sudden job loss, illness, or another unexpected event can cause financial stress on top of other worries. Establish an emergency fund to cover three to six months of bills if unforeseen challenges arise, according to NerdWallet. Having cash to fall back on during a rough patch helps keep you from going into debt or hitting dire financial straits.
Pay Off Credit Card Debt
Using credit cards for emergencies is sometimes necessary. But if you can’t pay the balance off each month, interest charges chew up part of your payment.
U.S. credit card holders pay about $120 billion per year in interest and fees, according to the Consumer Financial Protection Bureau. Pay your full balance monthly or as fast as possible to avoid these costly charges.
Two popular debt repayment methods are the snowball method and the avalanche method. With the snowball method, pay off your lowest balance first, and work your way up to the highest balance last, according to Credit Karma. For the avalanche method, pay down cards with the highest interest rate first, and work your way down. Either way, paying off debt eliminates minimum payments and boosts your credit score.
Eat at Home
Dining out is convenient but expensive. In 2021, the average U.S. household spent just over $3,000 on food away from home, according to the Bureau of Labor Statistics. Eating at home saves money because groceries stretch further than restaurant meals. For example, you can make multiple sandwiches from a loaf of bread and some veggies for about the same price as one sandwich lunch from a restaurant.
Be a Savvy Shopper
Compare prices before buying groceries, clothing, or furniture. Regarding insurance, get multiple quotes to score the best rates. Use apps like Capital One Shopping and Ibotta to find rebates, coupons, and the lowest cost on thousands of items.
If you focus and follow these money management tips, you can set, track, and achieve your financial goals in the new year and beyond.