A new year could mean a fresh start for your finances. It’s possible to make some changes to your current economic situation without setting unreasonable or unattainable goals — and you’ll feel better for having done so. A few basic things to look into include:
Reset No. 1: Your Budget
If your budget’s gathering dust from the last time you checked it, and you’ve had a few promotions and raises thrown in the mix since then as well, it’s probably time to reassess where your money is going on a daily basis. Assuming you don’t have credit card debt (which, if you do, should be your No. 1 priority to pay down), the biggest things to check for are what you’re putting away for retirement and in savings. If those numbers haven’t changed, despite the fact that you’re now making more money, that probably means you’ve simply supplemented your discretionary spending instead, which isn’t great. First, ask yourself if your emergency savings fund has cash for about six months’ worth of expenses in it. If not, start there. If your emergency savings is fine, see if you can handle contributing more to your company 401(k) or your supplemental account. You might not love the idea of taking from your entertainment fund to stock up on your savings right now, but the second you need to pull from it because your car broke down or your roof started leaking, you’ll sure be glad you have it.
If you need a little help with your budget, check out this piece for four easy strategies to help get you started, or this piece about how to slash your grocery spending.
Reset No. 2: Your Portfolio
If your current idea of a retirement plan is leaving your chunk of money sitting in a money market, now would be a good time to rethink that strategy. Investing in low-cost index funds is the best way to grow your money fast enough to keep up with rising inflation. In laymen’s terms, this means that as costs go up, so will the amount of money you’re earning on your investments, which means you’ll hopefully be able to think about retiring in comfort, when that time comes.
Besides keeping too much of your money in liquid assets, check out this piece for a few more things you might be doing wrong with your cash.
Reset No. 3: Start a Holiday Savings Account
If you struggled through this season to attend all the parties and buy all the gifts you wanted to, now’s a great time to open a brand-spanking new savings account and label it ‘For the Holidays Only’. This way you can start saving a little big from each paycheck in this account set aside specifically for next year’s holiday season. As an added bonus, now is a great time to open a savings account that will earn you interest. Check out this piece for some of the best savings accounts options of 2015, and this one to compare different savings account options based on your location and how much you’d like to put away.