How to Start Off 2016 Right … Financially, That Is
Making New Year’s resolutions is certainly a popular way to spend the days leading up to New Year’s. Many people make these resolutions, but according to a University of Scranton study, while about 45% of Americans usually make them, only about 8% keep them. While it’s great to lose weight or get organized, becoming financially smart is a much better way to start 2016. Getting your finances in order, and making intelligent financial decisions, will help you save more, but it can also help you to achieve other goals (for example, if you keep track of your spending, you may have a little extra money to join a gym and get in shape!). Many of us get lazy when it comes to our finances, but making small changes can bring big results. Here are some ways you can prioritize your finances and have a better financial year in 2016.
1. Make a budget
Let’s get this out of the way now. If you don’t have a budget, then you are probably not going to have a brilliant financial year in 2016. When designing your budget, it’s important to include all of your set expenses, as well as money for flexible spending, and also for savings and an emergency fund. Using a budget worksheet is an easy way to get started; once you know how much you currently spend, you can then figure out how much you need each month. Once you have a budget, be sure to add in your savings.
If you currently have a budget, but you never update it or keep it current, then your first step should be to update it now. Then, take the time to keep it up-to-date.
2. Set goals
Saving money is great, but most likely you won’t save that much if you don’t have set goals. Your goals can start small (for example, make a goal to set aside a specific amount each month toward savings and your retirement.) Once you are comfortably meeting your smaller goals, you can aim for your bigger goals. It’s a good idea to set the big goals ahead of time; this will help you start the year off right. Determine how much you want to save by when, and how you are going to do it.
It can help to set three different types of goals: short-term, intermediate, and long-term goals; also realize that your time frame or goals may change.
3. Get out of debt
Wouldn’t it be nice to start 2017 debt-free? If that’s a goal you want to make, then you should pay off your debt in 2016. Depending on how much debt you have, that may not be possible, but even paying off a small amount of debt is a smart financial decision. According to Credit.com, you should categorize your debt to determine which debt you should pay off first; consider which debts are secured or unsecured, and also look at interest rates. The more debt you can pay off the better, but each debt you pay off should be considered an accomplishment.
4. Prioritize your emergency fund
If you have loads of debt or unpaid bills, then you may need to pay those down. However, once you can meet your monthly bills, you should be putting money away toward an emergency fund. Experts vary on the amount of money necessary to have an adequate emergency fund, but there are tips you should follow. According to the Simple Dollar, you should never use a line of credit for your emergency fund because it can be revoked; it’s a good idea to have at least $1,000 even if you are paying down debt; also, make it a priority to build your emergency fund back up if you spend it.
If you are not currently in a serious debt situation, you should try to have several months of expenses saved in your emergency fund; usually at least 3 to 6 months is necessary, and more is ideal. If you don’t have an emergency fund, you may end up using credit cards for an emergency, which can cause you to have high-interest bills that you can’t pay off right away.
If you can do these four things, you will be set for a strong financial year in 2016. Of course, you also should try to curb spending, or at least, spend wisely.