Breaking the Bank? Three Personal Finance Tips to Get You Prepared for the New Year

Three Personal Finance Tips to Get You Prepared for the New Year

2014 is just about done and the New Year is around the corner. How are you planning to better yourself this year? Do you want to lose weight, get out of debt, or maybe travel abroad? Whatever your goals are, the best way to stick to a resolution is to plan ahead. If you’re like many Americans, getting a handle on your finances is at the top of your list…I mean, who couldn’t use a little less debt and a little more cha ching? So what’s the best course of action for becoming more financially aware?

·  Understand your current financial status

·  Find feasible ways to save money or cut back

·  Create a realistic budget and stick to it

1.  Understanding Your Current Financial Status

Okay so sometimes you don’t realize exactly how much help you need until you see it all on paper. Even if you believe that you’re doing pretty well for yourself a little assessment is ideal. Evaluating your current finances allows you to be prepared for what is to come. To get a true sense of what’s going on, you’ll need to:

·  Check Your Credit Report – you can get a free one every year from each credit bureau

·  Review your outstanding debt – credit cards, student loans, medical bills, etc.

·  Assess your debt to income ratio – determine how much you’re making verses how much you owe.

2.  Find Feasible Ways to Cut Back

Now that you have a better understanding of where your finances are, you can begin looking for ways to improve your financial status by saving and/or cutting back. Some of the most common but necessary expenditures that you can look into saving or cutting back on are:

·  Mortgage – Mortgages can really consume a significant amount of your money each month. Since it’s a necessary expense, cutting it altogether is impossible. What you can do to cut back or save on your mortgage is consider refinancing. Refinancing your mortgage can decrease the interest amount and in some cases even decrease your monthly payments.  Many companies offer opportunities to refinance at reasonably low rates which can save you a great deal of money in the long run.

·  Car Insurance – Again, car insurance is one of those things you can’t go without (or at least you shouldn’t), so finding ways to cut back is the best alternative. You can start by searching for car insurance online to compare prices and consider your options. You may find that by bundling various services or even switching insurance providers, you can save a few hundred bucks each year.

Of course there are other ways you can cut back. For example, if your cable bill is too high, consider downgrading your cable package. High cell phone bills? Find better packages, downgrade on the data plan, or even find someone to split the costs with you on a shared plan. There are plenty of ways you can save money whether its a few pennies or a few hundred dollars, it all helps in the end.

3.  Create a Realistic Budget and Stick to It

You know where you are financially; you’ve found ways to save money in the New Year, now you need a budget. Budgets are great for keeping you on course financially. When setting your budget, it is important to be realistic. Setting the bar too high could leave you feeling defeated before you even begin. Review your spending from the entire year. Pull out your bank statements, receipt books, and bills to determine exactly how much you’re spending each month. Then based on what you find set a budget that you can stick to, giving yourself a bit of wiggle room just in case things go awry.

Budgeting Tip: Now once you’ve created a budget, you’ll need to stick to it. Investopedia suggests using budgeting or financial apps to help you stay up to date on your spending.

Once you’ve completed the above steps, you’re ready to start the New Year off right. You’ll have a clearer understanding of where you are financially, you have already researched ways to cut back on necessary expenditures, and you’ve got a budget to help monitor your expenses on the regular basis. Becoming financially independent doesn’t have to be challenging, it just requires a little preparation, education, and implementation. I’ve got my finances in order…. The question is, do you?

piggy bank woman
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