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We all have resolutions and goals for the new year! Some are around fitness and health, but others can be about being smarter with your money! If managing your finances is one of your goals this year, here are some steps to give you a financial head start!
Whether its January 1st or August 15th – no need to wait for that next milestone date to begin. You can make improvements in your finances by just starting today!
Understand your expenses and debts
You need to understand where you are to really know how to get where you are going!
Write down your annual expenses (monthly bills) and all information on any debts owing so you know at a minimum what the expenses for this year will be. Multiply monthly costs by 12, adding in any irregular expenses. This is a really important step to know if your income will cover your expenses for the year, and where you might need to either find ways to be making more money, or spending less!
Create a monthly budget with a printable budget or a digital spreadsheet. Budgeting is a four-letter word for some people, but it doesn’t have to be. It isn’t all about restriction, it’s about knowing where your money is going so you can make it work better for you. There are printable budget sheets for those who like to write things out by hand and keep a budget binder, and Budget Spreadsheets for those who prefer the Excel/Google Sheets method that lets them customize and access from anywhere. Whatever method you choose, the important thing is to just start!
Track your spending
Now that you have created a budget, its important to actually track all of your spending for the month as well as to categorize your spending. This helps you get a clearer picture of your spending habits and enables you to more accurately adjust your budget categories.
This is the vastly overlooked crucial step to make a budget actually work! So don’t skip it!
Pay off Debt
If you have Consumer Debt (not including your mortgage), this is a great time to make a plan on how to crush your debts this year so you can become Debt Free! Create a debt repayment plan for any debts you may have. Pick a method that works for you like Debt Snowball or Debt Avalanche.
Debt Snowball method consists of arranging your debts from the smallest amount owing to the largest, and while paying all the minimum payments on each one each month, putting any extra savings you have toward the smallest amount first, and zeroing in on getting it paid off.
Once you do, move on to the next smallest and so forth. Avalanche is the same idea, except you list your debts by interest rates and focus on the highest first!
Whichever method you choose, these digital worksheets can help you track and execute your plan!
Track your progress
Now that you are putting your best foot forward, its a good idea to track your progress over time by monitoring your net worth! Your Net Worth is a calculation of your assets (the things that you own) minus your liabilities (the things that you owe). Tracking this over time will help you see a bigger picture of your financial situation and track if your wealth is growing, or if you are getting into deeper debt.
Whether you prefer to work in pen and paper, or on a spreadsheet, there are lots of ways to make sure you are on track this year to reach your goals!!
What goals do you have this year that organized finances are going to help you reach? Comment below!
For more content like this, check the Budgeting section of the blog!