Author: Amber Brubaker
Finances are a headache, whether you have a lot or a little, but you can make it a lot easier on yourself if you plan ahead. Use the New Year as an opportunity to make some new financial resolutions. If you want to experience a little more financial freedom this year, pull out your financial reports from last year, grab a notepad and calculator, and start making some realistic financial resolutions for the upcoming year.
1. Be SMART about Setting Goals
When discussing monetary resolutions, many financial gurus turn to the pneumonic device SMART as an aid for setting and keeping goals.
Specific: Setting a general goal is the beginning of failure. It leaves you too much room to procrastinate and relax on your goal until you give up on it altogether. As you make your financial goals for the new year, try to be as specific as possible by writing down specifically what you want and why you want it.
Measurable: Record the specific numbers and time frames for each resolution. These numbers will allow you to compare your original goal to what happens in reality, which will help you stay on track and measure your success.
Action-Oriented: Include small, action-oriented steps to go along with the goals you've planned. Going through these steps will help you reach your goal in the long run, but also allow you to feel the satisfaction of keeping your goal along the way.
Realistic: Large, complicated goals are very difficult to reach. Go for small, simple goals that you know you will actually be able to carry out, taking into account the skills and resources you have.
Timing: Though your goal should last the whole year, that doesn't need to be the only date you consider as you set goals. Lay out a series of deadlines to help you keep each part of your goal, remembering to keep it realistic.
2. Analyze Trends from Last Year
Pull out banking statements, old budgets, or any other documents and reports than can help you track your spending from last year. This will be a really important step in helping you to set goals for this year.
As you analyze these documents, look for certain trends in spending. Take an average of how much you spent on eating out, groceries, monthly subscriptions, fuel, utilities, clothing, and other common expenses to help you estimate how much you need for this year. Also look at your overall reliance on credit cards and which credit cards have the highest interest rates.
These trends will help you know exactly what spending habits you need to cut back on, thus helping you make solid goals. For example, make a goal to limit eating out to a certain dollar amount per month, or resolve to conserve energy to trim utility bills.
3. Make Short-term Savings Goals
Consider any surprise expenses that could come up during the year, like medical bills, car repairs, and vacations. You’ll want a considerable amount in your savings account so that you can take care of emergencies as they arise. Make a serious goal to save a specific amount each month that will go toward those unexpected costs, and don’t touch it for anything short of an emergency!
4. Consider Long-term Savings Goals
Once you have your short-term goals underway, you can start planning for your longer-term savings goals. Face these goals toward any large expenses in the future. Perhaps you need to save for a down payment on a house or a new car. Or maybe you need to save for your children’s tuition costs. How is your retirement fund looking, and do you have life insurance?
Planning for these expenses should not wait until necessity forces them upon you. Start planning today! You might want to start a special savings fund for those things or look into insurances and finance plans.
5. Set Your Budget and Keep It!
Make setting and keeping a budget one of your resolutions, since it’s the only way you can expect to keep any of your financial resolutions. Budgets are not always fun to keep up with, but if you can find one that works for you, it becomes easier. You just need to find a reliable method with which to track your spending.
Whether you use complex budgeting software or a simple notepad, keeping track of your spending in the way you prefer is the best way to keep with your budget. If you aren't sure how to get started on a budget, check out this article, which gives step by step instructions for budgeting as well as tips for keeping with it.
This year may be the first of many financially prosperous years to come, all because you were able to make some sound financial goals and keep them.