If you’re like 49% of people, your top New Year’s resolution is to save more money. But to stick to that resolution, you need a plan. If your “new year, new you” plan includes saving or investing (or both), you need to give your finances a year-end checkup before the clock strikes 12.
Here’s how to get your finances ready for the new year.
Figure Out Your Goals
What do you want to do with your money next year? Do you want to invest? Save? Start budgeting (for real this time)?
You can’t get your finances ready if you don’t have a direction.
Be specific about your goals.
- How much do you want to save or invest? $500? $1,000? More?
- What’s your deadline for reaching those goals? The end of the year? Six months in?
Defining your goals brings clarity, so you know exactly what you want to achieve. For example, it’s not enough to say, “I want to invest this year.” Great, but how much, where and by when?
Know Where Your Finances Stand
Now that you have some specific goals (or just one goal – whatever works for you), you need to know where your finances stand so that you can create a realistic plan.
- How much money are you bringing in every month (a.k.a. your income)?
- How much money are you spending on things (a.k.a. your expenses)?
Subtract your expenses from your income to see how much money you have left to play with at the end of the month. If you don’t have enough to reach your goals, at least you know exactly how much you need to add or subtract from your budget.
For example, let’s say that your goal is to save $12,000 by the end of the year. However, after subtracting your expenses from your income, you only have $900 left at the end of every month. So, to reach your goal, you need to cut your expenses or find a way to make $100 each month.
If you don’t know your income or expenses, you may as well be throwing a dart blindfolded and hoping you hit the bullseye (your financial goal).
Take Advantage of Financial Tools and Products
Want a simple way to figure out your financial situation? There are tools for that. Budgeting apps and expense trackers will give you a birds-eye view of your income and expenses. These tools link to your bank account to track your spending habits automatically.
Similar tools and apps are available for investing, so you can make smarter decisions on how to make your money grow.
Cut Unnecessary Expenses
If your spending habits still allow you to reach your new year financial goals, you may not need to cut your expenses (lucky you!). But most people will need to take a long, hard look at what they’re spending money on every month.
Make a list of your expenses. What can you get rid of? If you can’t get rid of an expense, can you reduce it? Maybe you can find cheaper insurance or ditch one of your streaming services. One last thing – if you don’t want to cut expenses, another option is to find ways to bring in more money. Get a second job or a side gig to boost your income and reach your new year goals.