If you’re like most Americans, you make a New Year’s resolution that somehow relates to your finances. The top 3 financial resolutions usually include things like spending less, getting out of debt, or saving more.
Let’s Be Honest
Let’s be honest though, are you really, really serious about improving your personal or business finances, or are you just enamored with the idea of being smart with your money?
You may want to read “Let’s Be Honest: Making Space For What Matters Most” for more context.
“Let’s be honest” is about making space for the things that matter most and spending time on what is truly meaningful to you.
As a Financial Planner, I help people make wise decisions with their money, so taking an honest look at behaviors and attitudes towards money is of utmost importance.
If you’re ready to start making changes that will positively impact your finances, here are some tips to get you started.
8 Tips to improving your finances in 2018
You’ve got to be honest and realistic
You only win if you’re honest and real with yourself. Lofty goals or resolutions sound good, but they are not always practical, and impractical goals will set you up to fail more than succeed.
Don’t do it alone
Making changes is never easy. Work with someone else, especially someone who knows you and is not afraid to call you out. If you deem your finances important enough, hire a financial advisor who is capable of helping you set practical, measurable and attainable goals. We fall short of many of our goals because of a lack of accountability.
Track your spending
Most people I speak to have a difficult time accounting for their money. Have you said this before, “I don’t know where all my money went!” FYI…having a MINT.com account does not count as tracking your money. In fact, sometimes the digital aggregators, like Mint.com, can give you a false sense of knowing what’s going on with your money. Tracking means actually looking at how much you spend over a period of time in different categories, i.e. grocery, bar tabs, restaurants, entertainment, etc. MINT.com and other similar tools can be useful resources.
Understand how much your debt really costs you
Debt can be expensive. Particularly credit card debt. Let’s say you maintain an average of $10,000 of credit card debt a year, and your interest rate is 15%. That translates to $1,500 in interest a year…that you pay. Do that for 10 years…$15,000. I bet you can find something better to spend your money on.
Automate your savings
Your Netflix payment is automated. Your internet payment is probably automated. And I am sure your cell phone bill is automated. Why not automate paying yourself? Open a separate bank account. Pick a dollar amount to start paying yourself, and have that amount automatically go from your paycheck into that new account on the same day you get paid.
Take the free money
If you have a 401k at work, take full advantage of your company’s match if one exists. Call HR and find out if there is a match and how much. Let’s say the match is 100% of the first 3% of your income. That means for every $10,000 you earn, your company will invest $300 toward your retirement IF YOU save $300 towards your retirement. (3% of $10,000 equals $300. You put up $300, they put up $300). Free money. The only thing you must be mindful of is that the money is meant for the older, future you. It’s meant for retirement. If you earn $50,000 and save the 3%, your company will invest $1500 in your account. Not bad.
Fund an “O’Crap” account
The “O’Crap” account is my name for an emergency fund. We all have unexpected needs for money. Where will you get it? Your 401k (or IRA) is for retirement, remember? You’ll have the money in your “O’Crap” account. Keep this account separate from your regular spending account. A really good idea would be to automate your savings into this account!
Don’t wait to start improving your finances. Start now. Every year that passes is a missed opportunity you cannot get back. There is no rewind button. Be honest with yourself and pick the 1 or 2 of the things you feel are holding you back the most.