At the beginning of the year, lots of people try to make some changes in their lives, whether it’s related to their health, career, or finances. Today I want to share ten things you can do at the beginning of this year to get started off right financially.
1) Track Your Expenses
I cannot stress enough how important it is to track your expenses. I did not start this until last Summer and I’m so happy that I did. There is pretty much no way to tell whether you are wasting money unless you know where it’s going.
I track my expenses in an Excel spreadsheet. There are definitely some applications out there that are easier than an Excel spreadsheet, but I like the flexibility that Excel gives me. How you track your expenses is not as important as getting started; the sooner you start the sooner you can make a budget.
2) Track Your Debt
If you have no debt, congratulations! If you do have debt, consider actually calculating how much debt you are in. Whether it’s student loans, a mortgage, a car loan, credit card debt, or a personal loan, figure out how much you have left to pay off. Put it in an Excel spreadsheet, along with the interest rates. If the rates are above four or five percent, consider paying more than the minimum each month so you lose less because of interest.
Having debt in a file that I can reference encourages me to pay it down faster. I also imagine it will feel good to see the debt slowly disappear as I make payments. Another benefit is it will provide motivation to avoid future debt.
3) Commit to one money-saving activity
Whether it’s going to the library instead of buying books and DVDs, or couponing, consider picking one money-saving activity and really sticking with it. We started couponing last year and saved over $1,000 on groceries alone.
4) Set up automatic deposits to your retirement accounts
Setting up automatic deductions from your paycheck is a no-brainer when it comes to saving money for your retirement. I personally have a certain amount taken out of my paycheck and deposited into my 401k because it makes me not miss the money (since I never see it in my checking account) and it slowly builds up over time. If your company does not offer this, consider automatic deductions out of your checking account into an IRA.
5) Set up bills so they are on automatic payment
I like having my bills set up for automatic payments for a few reasons:
- You take out the risk of forgetting to mail in a payment or go online and make a payment
- It saves time
- Your bills will be paid at approximately the same time each month, making your finances more predictable
Setting up your bills for auto-payment is sometimes easy, sometimes a little more time consuming – depends on who you are paying. I have done this with most of my monthly bills and it makes tracking expenses even easier.
6) Get a credit card that has cash back rewards
I wrote about the benefits of a cash back rewards credit card in my post why credit cards are good. If you are paying in cash or using a check card instead of a cash back rewards card, you are losing out on free money (assuming you pay off the balance in full each month). The Discover it card is a great choice for cash back rewards, and I have been enjoying Discover’s cash back rewards for years now and will only use a different card if Discover is not accepted.
7) Manage your time better
Time is more valuable than money; once you lose time, you can’t have it back. Managing your time effectively can be a big factor when it comes to your financial success. Prioritizing, planning, and consistently re-evaluating your time are all important.
8) Pursue side income
Assuming you already have a job, consider looking for a side income source. The first step is to figure out if you can make time for a side income. Next, brainstorm – here’s five ideas to get you started.
9) Write down one big financial goal that will motivate you to action
Sometimes it takes a specific goal to motivate you to work at your personal finances. This could be paying down student loans, buying a first home (or a second home), or traveling. My personal “big” financial goal would be putting in new hardwood floors, new doors and trim, new windows, and new kitchen cabinets. Yes, it’s a big goal (I could have just said “renovate our entire first floor”), but it’s something that motivates me to continue to make more money.
10) Donate to one charity/nonprofit
If you don’t already give back some of your income to a charity or nonprofit, consider starting this year. There’s literally thousands of charities that are in need of donations. I have donations auto-deduct out of my paycheck, and my wife and I had a fun time picking which nonprofits we would donate to.
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Whether you’ve done a few of these already or haven’t done a single one, they are things you can do to actively get started on the right path for the new year.
Have you done any of these? Do you have anything you’d add to the list?
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Photo by Vadim Lavrusik
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These are all great tips. It really does start with making these small steps. Tracking your spending is HUGE. When we started tracking ours, it was a huge awakening.
All great tips DC! We do many of them or have done them in the past. I am a big believer in tracking expenses, especially if you’re needing to get your finances in order.
@FrugalRules Thanks! Tracking expenses makes you feel like you are accomplishing something and is an easy first step. I’m so glad I started.
These are great tips. This year I plan to closely keep track of our expenses as our budget is going to be tighter than last year. I’m sure to expect some surprises.
@Goldeneer There’s always surprises….
These are all great tips DC. I am working this year to maximize my credit card rewards and using them more responsibly. I know it can be done, but I have to make sure I never miss a payment.
@DebtRoundUp Yep as long as you make the payments you can only profit!
Number 8 and Number 9 is what I am focusing on in 2013. We are planning to pay off $17,000 our mortgage this year, so that is our big goal for the year. So far we are on track :)
@deaconhayes $17k is a ton of money, best of luck!
Great idea about committing to one money saving activity. Then it becomes a habit and you can get a second one!
@RFIndependence Definitely!
I really like the idea of just committing to one money saving activity and sticking to it. The cool thing about it is that you see progress and want to find another, then another. Before you know it you have cut back your expenses drastically.
@KyleJames1 You have to start somewhere. It’s easy to become overwhelmed if you try to take on too much at one time.
Last year at this time we began doing pretty much everything you listed above and it has made a huge difference. No, we haven’t become debt free overnight but at least we have a clear picture of what we need to work on and exactly where our money is going.
This year my big financial goal is to pay off my student loans. A little over $11,000 to go!
@Jordann Nice! That’ll be a great feeling, I’m sure.
I constantly do 1 2 4 6 8 and maybe more! I love cash back rewards.
@Money Life and More Nice!
Great post. I’m a huge fan of the side hustle. I really enjoy writing jobs that have helped us pay off debts and save for vacations.
I’m definitely working on pursuing side income. I’ve been doing some dog walking on the weekends and hope to pick up a few other small gigs. A good part of my Christmas shopping was done with my credit card rewards. It was a win-win for me because I pay my bill in full each month so all the of rewards I used to buy presents were like free money.
A great article. I try to use all of these tips. I’m a huge fan of tracking my progress and making pretty graphs to motivate myself. Seeing where you’ve been and where you’re heading is incredibly helpful and motivating.
Hi DC. New reader here and I think these tips are a great way to set some goals for the new year. I am really working on the side income part of my equation. Extra money makes it a whole lot easier to work your way to retirement.
I don’t know how I missed this epic post? Really top shelf work DC I really like that you added donating to charity. So many of the worlds problems could be solved if more people did it.
Hey DC, great post with some great tips for people and who actually continue “New Year’s Resolution’s”. I seldom hear finances being mentioned during this time and they really should be. Becoming financially responsible is all about getting motivated to take action and the New Year could be the perfect time for a larger amount of people to take advantage of it. I think other “life events” such as graduation from college are another opportunity people have to start off on the right track towards financial responsibility. Thanks again for the post!