How to Kick Financial Butt in the New Year
I hope your new year is getting off to an excellent start. If you’re anything like me, you have so many ideas running through your head and you use this time to plan out where you want to go. Each new year can be used like a fresh start. I say this specifically for those who want to make a financial change. Remember, you can’t change the past, but you can use those past experiences to create a vision for the future. That’s why the new year is so crucial to get started off right and kick serious financial butt throughout the year.
In hopes to provide you with some tips on how to work toward financial independence, here’s how to kick financial butt in the new year. You can grab your finances by the horns and do what you want with them. Ever since I’ve gotten out of debt, I use each year to craft a plan to make sure I’m doing what I want. Hopefully you can to.
Know Where You Stand
You obviously can’t know where to go without understanding where you are now. If you have no idea how your finances look like, then you need to get a grip and understand your financial reality. You can do a lot of things with money, but until you understand your overall picture, you can’t create any road map.
Are you ready for retirement? Can you pay off your debt? Can you buy a house? How much do you have saved? These are just a few of the questions you need to ask yourself each and every year. The new year is perfect to get started.
If you don’t use a financial aggregator, then I’d highly recommend you sign up. I’m a huge fan of Personal Capital, but others have success with Mint.com. You can see how they both stack up here. The good news is both are completely free to use.
The way these work is you can bring all of your accounts in one place (bank accounts, credit cards, loans, mortgage, investments, and assets) to see how well you’re doing. It can show you how much you spend each month, how much debt you have, and what your overall net worth is. This is powerful information to use when planning out your financial adventures for the year.
Create a Budget
I know, I know. The “B” word. So many people hate the “budget” word. Well, from a man who never budgeting a dime in his life to one who has a detailed budget, I can tell you that a budget is very necessary. There are so many different ways to create a budget, it’s not even funny.
You can go with an envelope budget, zero sum budget, three step, or even percentage allocations. You can learn more about them here. No matter what budget you pick, you should pick one.
Budgeting is a cornerstone of personal finance for a reason. If you have no idea where your money is going, then you can’t make the necessary changes to keep more money in your pocket. Remember, the key to having a good financial future is spending less than you earn. Budgets can allow you to do just that.
They keep you organized and under control. Yes, there are times when your budget gets destroyed, but if you have plans in place to handle those times (more below), then you’d be OK.
So, start out the new year with a new budget. Your finances will be much happier and so will you!
Create Savings Goals
We should all be saving money. It’s so crucial to our financial success. It really is.
I wasn’t much of a saver before I focused on paying down my debts. It took me too long to realize the importance of saving money, but now I shout it to the hills. You need to be saving money, no matter if you’re in debt or not. Oh, and you can save money while paying off debt. I did it with much success!
There are a number of ways to start saving money, but you should work on creating savings goals (also known as buckets). What do you want to so with your money?
One goal can be for purchasing a new car. Another could be buying new furniture. Maybe a down payment on a house. No matter your savings goals, you should create them. These will help you figure out how well you’re doing and where you need to focus your savings efforts.
So, how do you go about saving? Do you have any extra money each month to go toward you goal? For myself, I did well by treating my savings like a monthly bill. I always paid it or I had to pay my savings account with interest. I loved this method.
You can also go with an automated savings system, like Digit. I use this savings app and it’s great. It’s free and it really does work. I’ve never had any problems with it and it saves money for me based on cool algorithms. Check out Digit or read more about how it has changed the way I save!
When you create your goals, make sure you have a bank account that can support buckets/goals. I use Capital One 360, but have also use SmartyPig. Both are extremely easy to use and don’t take long to get set up. Capital One 360 is more of a full-fledged banking solution, while SmartyPig is only for savings. Check out how you can create savings buckets with Capital One 360.
Eliminate Bad Financial Habits
Well, isn’t this one just so broad! You know, just fix all your problems and you won’t have them anymore. It’s easy!
That’s not really what I’m talking about here. What you need to do is focus on just one bad financial habit within a given time frame. It could be a month, a quarter, or even a year. Don’t expect change overnight with some of these habits.
For me, one I’ve worked hard on it not going to the grocery store hungry or without a list. Trust me, I’ve been there and done that. I go in just for one item and come out with a cart load of groceries worth over $100. What the heck happened? This one would be good to tackle in a quarter. I can set a plan in motion to change how I go to the grocery store. I can plan my shopping days and make sure I’m not killing my budget when I’m in there.
Whatever your bad financial habit are (we all have them), the new year is the best time to come up with an action plan to face these habits and break them. Don’t try to take them all down at once. You will get overwhelmed and that will lead to broken promises to yourself and your money. Just don’t do it. Put your attention on your worst habit, which is costing you the most. This is what you need to go after.
Got Debt? Kill It!
I’m a fan of going after debt, punching it in the face a few times, and then killing it. Yes, I’m a debt murderer, but you can get over it. Debt isn’t nice to me, so why should I be so kind? While you might think this action is obvious, many people don’t face their debts. I know I surely didn’t for a long time.
Think about it for a second. You just went through the holidays, where a majority of consumers buy a lot of crap. If you were already in debt, chances are you’re in even more now. Take the new year and work on killing this debt. Don’t let it go by another year. You’re losing so much to the bank, it’s not even funny.
I don’t care if you choose to pay of your debt with the debt snowball or the avalanche. JUST DO IT!
Seriously, everyone I’ve spoken with in debt gives me some similar excuse as to why they are holding off on paying down their debts. If you have credit card debt with an average of 15% interest each and every year, just think how much money is going to the bank. That’s a lot of cash, which you could be using for yourself to save or invest. Come on, it’s time to kick debt in the pants and do this.
Take some time to look over our fighting debt category where there is a lot of articles outlining debt and all the different ways to slay the dragon!
Try to Earn Extra Income
I can honestly tell you my life completely changed once I started this blog. It really did. I wouldn’t be where I am today without it. I wouldn’t be working for myself. I wouldn’t be enjoying what I’m doing. This blog changed my life, but more importantly, it helped me learn how to make extra money on the side.
I’m a huge proponent of making extra money (there is an entire category on this blog for it). For years I side hustled my way to more money. When my family was sleeping, I would be working. When the TV was on, I would be working. I maximized my time to make sure I was learning new things, executing on my plan, and bringing home the bacon.
Too many people think earning extra money is not possible. They leave it up to their job to pay them more or try to find a different one with higher pay. I don’t like that game plan. You can’t wait around for a raise or promotion. You need to get out there and hustle for your money.
Don’t be afraid of putting in the work. It can pay off with increased earnings and new connections. Here are some different articles outlining different ways to earn extra money. Look them over to see if you can find something you can do.
- 17 ways to earn extra money before Christmas (while it’s not the holiday season, these are still very pertinent)
- Become a Virtual Assistant
- 6 Ways to earn extra money
- 6 Side Hustles you can start for free
- 10 ways to earn extra cash in college
- 7 simple ways to make money this weekend
Don’t Forget About You!
This might not be financial related, but it’s still very important. This is an area where we all could probably do better. Remember that money is just a thing. It’s what you do with it that can define you.
You need to make sure to use the new year to also focus on yourself. Whether this be your health, your mindset, or your relationships. Until we get ourselves into a better place, we can’t get our money there alongside us.
For years, I neglected the advice of my very intelligent wife. She told me to exercise more, get out more, do this and that. I heard her, but I was focused on making more money, building my business, and changing my finances. It wasn’t until I got on the scale one day and realized I wasn’t happy with me. Since that day, I’ve dropped 20 pounds and I feel much better. My renewed self is allowing me to have a better attention span and focus on my goals for my money and my business.
She was right all along, but I was a stubborn mule. I’m sure she’s reading this and smiling a bit.
You don’t have to go out and get a gym membership, but do something for you. When you neglect yourself, you’re doing a disservice to the things you need to take care of throughout the year.
As you can see from these steps above, this is how you can kick financial butt this year. Come up with a plan, figure out how to attack it, then execute. There will be stumbling blocks along the way. No plan is perfect or immune from what life likes to throw at you. If you make sure you take time to save, then you can be prepared for life’s little twists and turns.
Each and every year, people create goals they want to achieve. They problem with most of them is they are too broad. I want to lose weight. I want to make more money. I want to get out of debt. These are good goals, but they are entirely too broad. How much weight do you want to lose? 5 pounds, 10 pounds? How much extra money do you want to earn? Great, you want to get out of debt. How are you going to accomplish it? How much debt do you want to tackle? Create actionable plans and goals and that’s how you can change your financial life for the better.
Now, go get it!
Also, take some time to enjoy this new year infographic from my friends at Personal Capital.