New Year, New Finances
New Year, New Finances
Boost your savings and pay off debt in the upcoming year.
The New Year is quickly approaching, which means it's time to set a New Year's Resolution that will change your lifestyle in a positive way. It's not uncommon for people to set a financial New Year's Resolution such as paying off debt and amplifying savings. People set resolutions with good intentions, but might not know how to properly execute their new goals. Here's how to get ready to start next year off on the right financial foot.
Let's start saving
If you haven't started saving anything already, don't panic. The first thing you need to do to start off your new financial year is to establish a savings plan. It's only too late to start saving if you don't start now. Even if you only have a small amount to open a savings account with, do it. It's okay to start small with your savings because over time you'll be able to make saving more of a priority and make a bigger contribution. Seeing your savings increase over time will get you more excited about saving money.
Read More: 10 Commandments For Financial Success
Even if you're only starting by putting away a small amount into your savings, it's important to make that amount a priority. Before you prioritize your savings, you want to make sure you have a budget. If you don't have a budget or track your spending, you're going to end up spending more than you plan to. Your cash flow can't keep up with your spending if you don't have a budgeting system. Once you have your budget created, take a look and see if there are any discretionary expenses that can be cut out. An example of this would be if you're eating out 4 to 5 times a week. You could start by cutting this back and take that extra money and put it towards your savings. Cutting back on discretionary expenses might only have to be temporary while you're getting your savings started. Once you're consistently putting a specific amount toward your savings, you can slowly add those discretionary expenses back to your budget while distributing to your new savings.
Enhancing your income
Maximizing your income is a great way to help fund your savings without feeling like your regular income is taking a hit. One way to maximize your income is to try a no-spend challenge. A no-spend challenge refers to a period of time in which you intentionally chose not to spend any unnecessary money. During the challenge, you're only allowed to spend money on bills and necessities. This challenge can be a great way to practice some financial discipline because you feel motivated. Set a financial goal for the end of your no spend challenge to help keep you from buying that cup of coffee in the morning! If you're just getting started with the no-spend challenge, start off with a no-spend weekend. People often spend more discretionary money on the weekends, so starting with a no-spend weekend is a good way to start. After you've had a no-spend weekend, transition to a no-spend week. You can build yourself up to a no-spend month, multiple months, or even a no-spend year. By the end of your challenge you'll be amazed at how much you've saved by cutting out all discretionary expenses from your life.
Read More: Make Your New Year's Goal SMART
You can also enhance your income by adding other income to your regular life. You can do this by getting a side hustle. A side hustle is a means of making money alongside your main form of employment or income. Having that extra income every month, in addition to your normal income, can help you keep on top of your finances. You may think you don't have time for anything extra, however, having a side hustle can be super easy and convenient, if you choose one that suits your life. As a side hustle, it's meant to be something you do on the side to make extra income. You don't have to quit your job to keep up with your side gig. Some examples of side hustle that can be flexible are tutoring, driving for rideshare, babysitting or pet sitting. These days there are even more side hustles that aren't even jobs. For example, you can sell your unused items and put that money you make towards your savings. Expanding on a hobby is another great example of a side hustle. If you're good at crafting, you can sell some of your handmade items for cash. Having a side hustle is more common than your think and that extra income will help your financial future.
Read More: Five Side Hustles For Hustlers
Saving vs. Paying off debt
Now that we've established a savings plan and maximized your income, you can decide how you best want to use that extra money: saving or paying off debt? Paying off your debt is important, but so is building financial strength and planning for the future. If you have a great amount of debt, you want to make sure you have an emergency fund before you start tackling your debt. The suggested starting point for an emergency fund us three months' living expenses. After you've securely saved three months' expenses, work your way up to saving a total of six months of living expenses while your start to pay down your debt. Keep paying your minimum payments on your debt while working on the emergency fund, so you don't fall behind.
You'll want to pay down your high-interest consumer debt. To get started, calculate your expendable income listing all of your regular expenses, and see if there's anything you can eliminate (unused subscriptions etc.). Then calculate the amount of money that you can contribute to your debt above the minimum amount required. Focus on one debt at a time, but it's important to keep on top of your other debts by paying at least the minimum payment each month. If you're not making at least the minimum payments every month, your credit will seriously be affected. You can learn about different debt payoff strategies here.
The ultimate goal is to find a balance between being able to pay off debt and saving at the same time. Prioritize paying down significant debt while making small contributions to your savings. Saving something is better than saving nothing. As mentioned earlier, even if you're only saving a small amount it will build over time. Once you've paid off your debt, you can more aggressively build your savings by contributing the full amount you were previously paying each month toward debt. When deciding whether to pay off debt or save money, the best approach is a balanced one that includes both.
Read More: Minimize Your Debt This New Year
Making your finances a priority is a great way to start the New Year. It may take more than a year to reach your financial end goal, but if you continue to be consistent you'll be on the right financial track. Whether your goal is to build your savings or pay off debt, make your final end financial goal to have a balance of both. If you're worried your regular income won't suffice for your financial goals, add an extra income to your life. Find a side hustle that fits with your schedule. Even if it's a small amount, having that extra income is a great way to boost your savings. If you're nervous you won't have time for a side hustle, try the no-spend challenge. You'll be amazed how much you're saving by cutting out all discretionary expenses from your life. Making your finances a priority will set the tone for the rest of your year. Make your financial New Year's Resolution now!
Katherine Fatta is the Social Media Coordinator at Navicore Solutions. She creates fun and informative social media posts that engage the public. She's also the host of Navicore's podcast, ‘Millennial Debt Domination.' You can listen to our podcast here.
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