The beginning of the year is ideal for implementing positive changes in your spending and saving habits. By achieving small changes in spending, putting together a long-term plan and committing to new habits for the year, you can build a financial future with a solid foundation.
However, knowing where to start can be difficult. To assist you in putting together your own plan for fiscal responsibility, here three easy-to-understand steps:
1. Start with Basic Cutbacks Successful financial changes require starting small and deciding on goals that are achievable. You can find some wiggle room in your budget by looking at those expenses that go by without much notice. Look at the money you spend on dining out. Look at the data charges and overages you’re paying on your cellphone bill. And, look at the car repairs. These are all areas you can improve upon. First, pack lunches twice a week. This will take minimal planning and save you around $80 a month. Allowing yourself to purchase lunch on the other days will give you time to socialize on some days and get a break from the office. Next, contact your cellphone company to make sure you are on the best plan for your needs. Do you really need the plan with the highest download speed and unlimited data? Making a little change will add up in savings for the year. The next cutback will require spending some money up front, but will save you over the long haul. Take your car to the mechanic for a safety inspection. Maintaining your vehicle before things break could save you hundreds of dollars for the year. Simple tasks, like oil changes and putting air in your tires, can avert expensive repairs later on. So, if you remember food, phone and car, you’ll be off to a good start.
2. Prepare for Retirement Early Your next step will help you earn more using the money you already make. Boost your savings by investing in retirement plans that come with a company match, interest and tax advantages. Popular saving routes for retirement include 401(k)s, Individual Retirements Accounts (IRAs) and annuities. Start with the 401(k), especially if your company has an Employer Match plan, where the company takes from its own pocket to increase your earnings. Next, you can choose between a traditional and Roth IRA, depending on when you want to receive your tax benefit. IRAs are helpful for augmenting the money you have in a 401(k). With an annuity, you will have a reliable stream of income that can last you throughout your retirement years. Meet with a financial adviser to make sure the annuity you choose is properly tailored to meet your future income needs.
3. Set One New Goal for 2014 Your final step down the right path will be developing a new habit for responsibly handling your money. Consider it a New Year’s resolution that you want to uphold throughout all of 2014. Based on your situation, you can decide on a habit that will benefit you most. If you’re not sure what to choose, here are some options:
- Build and maintain an emergency fund of at least $1,000. Whenever you use money from this fund, use your next paycheck to replenish it.
- Track your spending to ensure that you never overdraw an account throughout the year.
- Focus on meeting deadlines, and aim for a year without paying a single late fee on any of your bills.
Making changes isn’t easy, but having control of the money you work hard to earn will quickly reap its own reward.
Alanna Ritchie has spent years studying, writing and learning to love the intricacies of the English language. Today, she works as a content writer for Annuity.org, where her primary focus is personal wealth management.