Financial Fitness: Getting in Shape for the New Year
As the clock strikes midnight and a new year begins, you may find yourself wondering what the upcoming year will bring. You may even make New Year’s resolutions, with plans of getting in shape, ending a bad habit or traveling somewhere new. Although these things may be at the forefront of your mind, you must not forget that financial fitness can be just as important. By getting into shape financially, you can better prepare yourself for the New Year as well as the years to come.
Financially Educate Yourself
Once the holidays are over, it’s easy to get in a bit of a financial slump. To overcome this and prepare for a successful year, it’s a good idea to learn more about how you can get back on track. There’s also no better time to start fresh if you’re hoping to revitalize your finances. Some good ways to get started are as follows:
Review Last Year’s Spending
Part of your financial education and preparation at the start of the New Year is assessing your spending from the past year. By reviewing your budget and expenses, you will get an idea of what you can expect to spend in the coming year. Creating a benchmark for your spending will better enable you to move forward by modifying your current spending patterns or creating a new budget.
Create a New Spending Plan
Analyzing your old budget and seeing your spending in different categories can help you decide where to make adjustments. For example, if you find that you spent a large amount of money on eating at restaurants or on buying coffee on a daily basis, you can set a goal to decrease your spending in these areas by engaging in these activities less frequently or by spending less with each trip.
You can also reduce debts with your new spending plan. Try setting aside funds each paycheck to start paying off loans and credit cards. Once you’ve taken care of your existing debts, you can begin to plan ahead by setting up an emergency spending account to prepare for unexpected expenses that may come up throughout the year.
One of the best ways to keep your finances in order and stick to a budget is to set goals. These goals can be daily, weekly, monthly, etc., as long as they’re realistic and will benefit your overall financial state.
Some goals will take little time to achieve. Having small goals throughout the year can help you gain a sense of accomplishment each time you reach one and can also prepare you for bigger goals to come.
Other goals you may set will occur on a regular basis. Say you want to spend $50 or less on “extras” such as clothing, snacks or take-out meals each week. Tracking your spending on these items each day will keep you from going over budget, and you may even have money left over. Sticking to your weekly plan will also play an important role in your long-term budgeting.
Long-term financial goals allow you to look at the big picture. Setting these goals for the year or for the years to come can be as specific or as broad as you want them to be, as long as you also figure out a plan for how you plan to reach them — this is where your short-term goals come in. Your short-term goals serve as checkpoints that will help you reach those you’ve set for the long-term.
For example, if one of your goals is to pay off your mortgage in the next five years, you will need to set some smaller goals throughout that time period to accomplish it. Every time you make a payment, whether it happens each paycheck, each month, or each year, you will be one step closer to your ultimate goal.
Although reaching a goal can sometimes be enough reward in itself, if you’re seeking extra motivation, try creating an incentive for yourself each time you reach one. Rewarding yourself for an accomplishment can provide the motivation needed to stay on track and ultimately achieve what you hoped to. This positive reinforcement can even give you reason to continue setting goals in the future.
One thing to keep in mind when deciding upon these incentives, however, is whether or not the accomplishment matches the reward. For example, if you reach a small savings goal, you may want to keep your reward simple like going out for dinner, rather than rewarding yourself with an expensive handbag. This will help you to avoid undoing the work you put into reaching this goal. Keeping your rewards proportional to your goals will help you save more while still staying motivated along the way.
Whether you’re looking to revamp your finances or make a few simple changes to your budget, working on your financial fitness at the start of the New Year can help make the year a success. The better you plan and the more you stay focused in each aspect of your finances, the better off you will be and the closer you will get to achieving financial wellness.
Tags: education, financial, goals, long term goals, new years, short term
April Clobes is Executive Vice President/Chief Operating Officer for MSU Federal Credit Union in East Lansing. She can be contacted by e-mail or by calling (517) 333-2254.