Is your New Year’s resolution to improve your finances? Good news: You don’t have to wait until January. Now is the perfect time to start brainstorming a few ideas to improve your financial health. From creating a budget to cutting back on recurring expenses, here are four ways to turn your financial life around.
1. Know Where Your Money Is Going
Do you know exactly where your money goes every month? Probably not. The truth is, many people don’t keep as close of an eye as they should on their expenses. Unfortunately, that’s one of the biggest mistakes you can make.
Regardless of how much, or little, money you have coming in, it’s important you know where your money is going. After all, that’s the only way to determine what expenses you can realistically cut back on. You can also use this information to figure out how much you can allocate to your emergency fund or savings account.
Thankfully, there are many methods you can use to keep track of your money. You could take a manual approach, keeping your receipts and making a list of your expenses to review. Or you could take a more modern approach and use an online banking app. Doing so means you’ll have access to your banking information from the convenience of your phone, whenever you want. You can review your expenses, check your current balance, and move money around however you see fit.
2. Maintain a Budget
Many people know the benefit of creating a budget. The problem is, that doesn’t mean they create one. According to research, just 32% of households in the United States create a monthly budget. That’s a shockingly low number of people, especially considering the struggles many are having in this time of high inflation.
The best means of improving your finances is to create a budget. Not only does this tool allow you to keep track of your income and expenses, but it can help you achieve your financial goals. Whether you want to start saving for a down payment on a house or buy a new car, having a budget can make those dreams a reality.
There’s a common misconception that creating a budget is difficult. While it comes with its own challenges, you don’t have to start from scratch. Several easy budgeting methods already exist that you can simply adopt. For example, there’s the zero-based budget, the 50/30/20 budget, and the envelope system budget, to name a few. There’s a good chance one of these will work for your specific needs and financial goals.
3. Cut Back on Recurring Expenses
Taking steps to control your monthly expenses is a great way to improve your financial life. And while you can’t cut out every one, like car insurance or rent, you probably have some recurring costs you can avoid. According to research, more than half of Americans don’t know exactly how much they spend on recurring expenses. This means the majority of U.S. consumers are most likely overspending on their monthly expenses.
To keep yourself from this kind of unnecessary spending, take a few minutes to review your recurring expenses. Then determine whether or not all of them are necessary. For example, maybe you pay $40 a month for a gym membership you don’t use. If that’s the case, canceling the membership will save you almost $500 per year. Cable is another recurring expense you might not need, especially if you do the majority of your viewing via streaming services.
There are also ways you can cut back on recurring expenses without eliminating them outright. You could lower your utility bill by reducing your electricity consumption. You could lower your gas expenses by carpooling or taking public transportation. While simple, these small lifestyle changes could save you a great deal of money.
4. Be Careful With Credit Cards
Credit cards offer many benefits. When used correctly, they can help you build a good credit score. Unfortunately, many people don’t use credit cards wisely, making purchases they fundamentally can’t afford. While being able to borrow money is one of the benefits of credit cards, doing so can lead to trouble.
Overspending on a credit card and not paying your balance off in full means you’ll acquire burdensome interest. The more interest you accrue, the harder it’ll be to pay off your balances. This is one reason so many Americans find themselves in debt.
Credit cards can be a slippery slope, especially if you don’t have healthy spending habits. To keep yourself in check, make rules for how you use your credit card. For example, you could decide to only use your credit card for groceries or for gas. Having these limitations can keep you from overspending.
It’s no secret the last few years have been financially difficult for many. Whether you’re still recovering from a pandemic layoff or trying to stay afloat with today’s inflation, you could probably use a few financial tips. While making the changes outlined above won’t right your financial ship overnight, they will help you make progress. Perhaps when next year rolls around, you’ll be in a position to make even more ambitious resolutions.
