The new year brings with it high hopes. One of those high hopes may be to make headway toward a stronger financial foothold. Hopes are the inspiration but it takes a plan to bring about significant change. In the first part of this four-part series, A New Year of Money: Evaluating Your Financial State, I discussed the importance of examining your past and present financial habits to gain an overall view of your current situation. The second installment, A New Year of Money: Goal-Setting to Make an Impact, examined choosing goals that will result in meaningful changes to your financial situation. In this piece, I’ll suggest some changes that will set your finances on a course to a better place this year.
The key to improving your financial situation is to take a tight grasp of your money matters. You may not have much control over how much comes in but you can exercise a lot of control over how much goes out.
Reassess regular expenses
We often take our regular expenses for granted without even considering that they could be lowered if we trim the fat. Examine these possibilities for cutting down your regular expenses:
- Refinance loans at lower interest rates. Consider transferring credit card balances to your lower-interest cards.
- Reevaluate insurance premiums. Make sure you’re paying for exactly what you need and nothing more. Look for companies that offer discounts for good habits (non-smoker, safe driver…) or multiple policies.
- Do away with your landline. More and more people are opting to use their cell phone exclusively.
- Reassess your data plan. Are you paying for more than you really need – or regularly paying for overages? Your carrier can help you choose a plan based on the reality of your use.
- Revisit your entertainment options. There are a plethora of low-cost alternatives to the cable TV or satellite plan you may currently have.
- Do a household energy assessment. What could be unplugged, turned off (or down) or used less to lower your utility bills? Could investing in more efficient appliances, household repairs or insulation help you save on the monthly outlay?
- Lease a car instead of buying. Because lease rates are generally cheaper than an auto loan, you could spend less on your monthly car payment and put the money you saved toward buying something that increases in value over time (unlike a vehicle).
- Rethink where you shop. Are you purchasing household items and groceries at the best possible prices? We often get used to shopping at certain stores and fail to recognize cheaper alternatives. Be sure to consider Internet shopping, too – online prices are often quite competitive and many offer free shipping.
Build savings into the budget
Saving is a necessity! Determine a realistic savings “bill” and pay it – like any other expense – into a savings account. It won’t lead to “wealth” but it will strengthen your purchasing power and shore-up your financial footing.
Define a concrete goal
Once you’re sure that your expenses are streamlined, define what will represent financial growth for you. It could be to:
- eliminate a percentage of your debt
- save six months of living expenses
- increase savings for retirement or college
- make a significant purchase (without going into debt)
- save up a down-payment for a home
- make home repairs or renovations
The key to improving your financial circumstances is to manage your existing money in such a way as to free-up as much as possible, then allocating it so it does you the most good, for the short and long term.
How do you plan to improve your financial situation this year?