With the arrival of every new year comes the inevitable equivocating about resolutions. Some studies indicate that fewer than 25% of people remain committed to them after a month and merely eight percent actually accomplish them. While vowing to join a gym and start working out more seems to be on everyone’s agenda year after year, fewer and fewer people consider their financial health, often neglecting it entirely. This time of year presents an ideal opportunity for review of your budget; to reflect on any financial mistakes of the past year; and to plan for the future. Here are a handful of the easier resolutions to consider:
Start tracking your budget: The best place to begin is with an assessment of where your money goes over the course of two or three months. Review recent bank statements and credit card statements. Both of these are excellent resources to determine where you may be able to cut repetitive or unnecessary expenditures. If, for example, you’re eating out more than twice a week or washing your car every weekend, it will be easy to limit these costs without sacrificing them altogether.
Identify financial goals: Be specific about what it is you want to accomplish financially in the coming year. Vague promises will likely lead to excuses or worse yet, failure. By being as detailed as possible there is also a better chance of keeping on track. If, for instance, your objective is to save more, name a precise dollar amount and establish a regular schedule to make deposits to your bank account. Remember to keep your expectations realistic and you’ll have greater success and a much easier go of it.
Check your credit report: Regular review of your credit report is an integral part of maintaining healthy finances and keeping on top of your credit rating. Obtain a free report once a year from annualcreditreport.com. Generally, the average credit score falls somewhere between 600 and 750. A credit score of 700 or more is considered good, while a score exceeding 800 is regarded as excellent. A consumer’s credit score enables lenders to ascertain the risk of extending credit and guides them in establishing the appropriate interest rates. Consistent examination of your credit report will also reveal late payments or discrepancies such as unfamiliar creditors or accounts that are at risk. Be sure to report any errors immediately to the three credit reporting bureaus: Equifax; Experian; and TransUnion.
Establish “no-spend” days: Arguably, this will be one of the easiest financial resolutions to fulfill, so much so that it may eventually become a habit. In fact, you may already be doing it without even trying. Pick out one day each month or even one entire weekend where no money leaves your pocket or bank account. This may be particularly easy this time of year when nobody wants to go outside in the cold! Pledge to uphold the practice for the remainder of the year and it will soon prove beneficial to a frugal budget.
Accelerate debt repayment: The prevailing consensus on dealing with debt seems to be an approach called the “avalanche” method which recommends paying off those debts with the higher interest rates first. Of course, you should always pay the monthly minimum required, if not a little more; and, if possible, dedicate any unexpected windfalls such as a work bonus or football pool winnings to that goal as well and you’ll soon see those high interest rates eroding. The downfall to this course of action, however, is that it generally takes longer to see any progress. If small, more frequent wins are a better motivator for you, then you may prefer the “snowball” technique which advocates paying off the debts in order of smallest to largest. With this process, you may see more immediate success in both an improvement in your credit score and a reduction in the number of outstanding accounts. Since the higher interest rates are irrelevant in this line of attack, the end result though may be paying more over time.
Save Around the House: Everyone knows that regular maintenance of your vehicle will ensure that it runs well and can extend its life span. The same can be said of your house. In addition to basic maintenance, there are a number of small changes and simple upgrades you can make around your house that will save on home repair costs in the long run and may also lower monthly utility bills. If it hasn’t been done in some time, have your heating and cooling system inspected and remember to change the filters consistently per manufacturer’s specifications. Check all of your windows and doors for blowing air and plug the leaks immediately. The same goes for any holes you may find on the outside of your home in the brick walls or siding. Wash clothes in cold water and air dry on the shower rod or on a fold-up drying rack or even outside on a line. Most clothes will wash just fine without having to heat up the water first and will actually last longer if not constantly subjected to direct heat. Unplug electric appliances when not in use such as a toaster, blender or coffee-maker to avoid draining electricity unnecessarily and invest in a set of good quality rechargeable batteries for all of those devices that drain them rapidly like the TV remote or game consoles. Lastly, switch fluorescent and incandescent lights to LED bulbs. LEDs are up to 80% more efficient and 95% of the energy they produce is converted into light, while only five percent is wasted as heat. Though still more expensive than regular bulbs, LEDs last almost 15 times longer and are more durable and if you buy them in bulk, you will save more.
A yearly assessment of your financial health doesn’t need to be an arduous chore. Take on these few, easy resolutions and you’ll soon reap the benefits. Good luck! Wishing you all a very happy, healthy and prosperous new year!