What’s your New Year’s resolution? If you’re like many Americans, then you’ve resolved to spend less and save more in 2018. Everyone wishes he or she had a little bit more money in the bank and, with the holidays behind and a new year ahead, January is the perfect time to start getting finances in order.
Knowing where to start when it comes to your figuring out your finances, however, can be difficult. With that in mind, we put together a list of 14 simple tasks that’ll help you achieve your personal financial goals. On their own, these tasks can help you save money here and there, but together, they could revolutionize your financial life.
1. Make a budget
If you don’t have a budget put together yet, don’t even bother reading further down this list. Sit down, suck it up, and make a real budget. Without a budget, you have no record of your expenses and no real way to plan. Devising a budget is the foundation of financial health.
It’s also not that hard to do, so you have no excuse. A simple budget is nothing more than a spreadsheet where you list your income for the month and then deduct your expenses. This simple act shows you how much money you should have left to save, spend, and invest each month, which in turn enables you to make informed, intelligent decisions about your financial future.
Go make your budget; once you do, come back to this list.
2. Calculate your debts and anticipated payoff dates
Thinking about your debts can be a miserable, overwhelming exercise if you don’t come at it in the right way. If all you do is look at the total amount you still owe without any context or priorities, you’ll probably want to curl back up in bed.
That said, knowing what you owe is vital to understanding your full financial picture. Pull up the statements for all your debts and add them up in a new tab on your budget spreadsheet. Make sure to list (at the very least) the name of the debt, the total amount borrowed, the total amount that you still owe, your interest rates, and your anticipated payoff dates.
These figures will probably add up to some huge, unfathomable number that seems impossible to pay off, and that’s fine. You eliminate debt by chipping away at it with purpose and a plan. Adding it all up makes that possible.
3. Order a credit report
Much like adding up your debts, most of us don’t really enjoy looking at our credit reports. Even if you have no specific reason to worry about your credit, there’s always the lingering anxiety that your report will contain some awful surprise that has caused your credit score to plummet without your knowledge. Sure, we know that we’re better off knowing our credit scores, but it’s not exactly fun to check.
Still, you should order a credit report as soon as you can just to make sure that you stay in the know. You’re entitled to one free credit report each year from each of the three major credit-reporting agencies, so you have no excuse for putting it off. Look on the bright side: maybe it’s better than you think.
4. Add up your current assets and investments
Even if you don’t consider yourself an investor, you might still have assets and investments that are worth thinking about. Often, these are automated investments, such as your life insurance or your 401(k). While these assets may not be easily accessible and might still be growing, you should make sure that you’re aware of how much money you’ve invested and how it’s doing if you really want to understand your finances.
5. Make a retirement plan
The less you think about retirement, the more likely it is that you’ll benefit from forcing yourself to sit down and come up with a concrete retirement plan. As soon as you start to work and earn money, you should start considering your retirement options. The sooner you start to save for retirement, the less you’ll actually have to contribute, as interest will help to compound the amount that you save.
How much should you save and how should you save it? That complex question can’t be answered in full here. In general, you should be “paying yourself first” and saving a bit of your paycheck as soon as you’re paid. You should also be taking advantage of any savings incentives your employer offers, such as matched contributions. You should definitely open a 401(k) or IRA; whatever works best for your situation. Past that, if you want to learn more, we suggest talking to a financial advisor, who can help you put real numbers to your retirement plan.
6. Write down real, actionable, pass-fail goals
Now that you have your current finances more or less figured out, it’s time to figure out your future. The best way to do that is to make goals that are specific and concrete. Vague goals such as “save more” and “spend less” are easy to make and even easier to give up on. A goal such as “save $100 each week,” on the other hand, is much easier to keep track of.
Not sure what your exact goals should be? That’s fine. You don’t need to predict the future so much as you need to come up with real numbers so you know how much progress you’re making. You can always refine your goals over time as you get a better handle on your capabilities. If you need to, make an educated guess and move on.
7. Prioritize your debts and come up with a repayment plan
If there’s one thing that will sabotage your financial goals, it’s debt. No matter how much money you make, if a significant percentage of your income is going toward keeping the debt collectors from your door, then you’ll struggle to keep your head above water.
If you want to get rid of your debt fast, however, you’ll need a strategy. Most debt repayment strategies rely on prioritizing a specific debt and paying it off aggressively (while still keeping up with your other monthly minimum payments). There are two schools of thought here.
On one hand, you have the debt snowball, where you prioritize the debt with the smallest current balance and pay that off first. You’ll pay it off quick, eliminate a payment, and snowball that extra money into paying off your next smallest debt.
On the other hand, you have the debt avalanche, where you prioritize the debt with the highest interest rate. Often, this debt has the largest current balance as well. While you can potentially save more money in the end with this approach, it can be harder to keep up with, since it’ll likely be a long time before you pay off this debt.
It’s up to you which approach you’d like to take. The most important thing is that you have a strategy at all.
8. Reduce routine expenses and negotiate better interest rates
Your fixed expenses, such as your rent and car payment, are mostly out of your control. However, it’s possible to cut down on your routine bills without making huge changes to your lifestyle.
Reducing expenses such as utility bills is simple in theory; just use less. Maximizing those savings can be more complicated. One of the best ways to minimize your electric bill, for instance, is to unplug your “energy vampire” appliances (such as your television) when you’re not using them. It’s tedious, but useful.
Reducing bills such as your cell phone, insurance, cable, Internet, and even credit card payments can actually be a lot easier than you might expect. As long as you’re in good standing with your bills, just call your providers and tell them you’re thinking about switching because the payments are too high. They might not budge at first, but if you’re stubborn, they might just lower your rates in order to retain you as a customer. It’s worth a shot!
9. Automate saving and start a $1,000 emergency fund
Many people blow off saving money because it doesn’t do them any good in the short term. Why should they be taking money they need out of their checking account and putting it into a savings account, where it’s harder to access?
Emergencies, that’s why. Disaster strikes when we least expect it and, no matter what the nature of the disaster, it’s likely to be expensive. In addition, if you don’t have buffer money saved up to finance that disaster, you’ll end up turning to borrowing and credit, which can turn an immediate disaster into a debt that lasts years.
Putting away at least $1,000 means that you likely won’t have to choose between getting the help you need and avoiding debts that could become a long-term burden on your life. Do it as soon as you can.
10. Cancel unnecessary insurance
Insurance salespeople are an interesting bunch. While some may be out to swindle you, most probably have your best interests at heart when they’re suggesting insurance plans for you. All of them, however, are incentivized to try to sell you as much insurance as you can afford. This is especially true for young people, who might not be as familiar with buying insurance and who often don’t need as much protection as older adults.
Take some time to figure out how much insurance you actually need, and then shop around for the best price. Take that price back to your provider and indicate exactly what you’re looking for. If they want to retain you as a client, they’ll have to find some way to save you money.
11. Make a will
Yes, wills are morbid to think about, but they’re also incredibly important financial documents that make sure your loved ones know exactly what to do when you pass on. It doesn’t matter if you don’t have much in the way of assets; you’ll save everyone a lot of heartache and a lot of money if you force yourself to get your will drawn up.
12. Identify your spending triggers
What causes you to overspend? Perhaps, a limited time sale seems too good to be true. Perhaps, a friend wants to go out on the town and can’t take no for an answer. Maybe a romantic partner has grown accustomed to the good life. Maybe a tech blog convinces you that you need the latest gadget all the time.
Whatever it is (and really, it can be any number of things), identify it and do your best to limit its influence over you. You’ll want to cut yourself some slack; no one wants to be the friend that always says “no” to a night out, or the person wearing beat up clothes to work in the name of saving money. However, if you can figure out what makes you spend, you’re much more likely to be able to control yourself.
13. Talk about money with your partner
Most of us don’t like to talk about money. We think that it’s rude or awkward, and we might not be especially proud of our bank accounts.
Still, you should set a precedent of having honest, frank talks with your partner about finances. Like it or not, money problems can have an outsized effect on relationships, especially if you’re trying to build a life together. Even if you aren’t happy with where you are now, it’s worth talking to your partner about it.
14. Don’t compare yourself to others
Ever hear of “keeping up with the Joneses?” It’s difficult to not look at the people around you and feel jealous, angry, or depressed when it seems like they’re doing better than you are. With the ubiquity of social media, it’s even tougher. It seems like everyone is always off having a great time, while you sit at home pinching pennies.
For one thing, most people present a much happier, more successful version of themselves than what’s actually going on. For another, it’s none of your business. Focus on yourself, work hard to reach your financial goals, and that’s all that matters.