How many times have you told yourself that this is going to be the year you become financially fit? And how many times has December rolled around and it ended the same as any other year? If you’re honest with yourself, you’re like most people — lots of goals, but most left unachieved.
So how do you break out of the cycle of unsuccessful goal setting? It’s likely that your goals are too vague and lack the appropriate “baby steps” needed to get them accomplished. Let’s make 2018 different. Let’s make 2018 the year you finally become financially fit. All you need to do is follow these five steps and you’ll be heading down on the right path.
Finally Set (and follow) a Budget
US Bank recently conducted a poll looking into the saving and spending habits of Americans. They discovered that just 40% of Americans use a budget! Without a simple budget, it’s nearly impossible to keep track of finances. The good news is that budgets don’t need to be a big and complex spreadsheet.
For most, your budget simply needs to be broken into 4 main areas. Such as:
- Pay Self First – A portion of income is designated to investing for your future.
- Save for Emergencies – Another portion drops right into your emergency fund.
- Pay Bills – There are ongoing bills that are (for the most part) predictable.
- Spend on Self – Leftover money can be splurged on anything that brings you joy.
That’s really all there is to it. If you’re saving for a new car, add another line. Then tweak the numbers slightly each month and set it all up to be automatic. That way you don’t have to worry about anything except how you can improve your earning ability.
Earn Money on the Side
For the past five decades, wages have barely kept up with inflation. But at the same time, costs of living have gone up. Over half of US households are saying that their family’s incomes are falling short of what they need to live. If this sounds like you, and you have eliminated all unnecessary expenses that you can, then it’s time to earn more money on the side.
Every single one of us has talents and skills. Now is the time to turn those skills into money. Fortunately, that’s easier to do than ever before. Even for those who have skills that aren’t easily monetized, you can create training videos and courses that are sold online. Your market is literally millions of people around the world, and the upward possibilities of earning money on the side are limitless.
Ruthlessly Attack Your Debt Payoff Plan
Nearly all of us have some sort of debt. Whether that’s a house, car, student loans, or credit cards. We all owe money somewhere. While debt in and of itself isn’t a bad thing (consumer debt isn’t desirable, but leverage debt can end up making you money), most of us would rather not owe anything to anyone. If you’ve followed the first two steps, you should have extra money coming in.
Make a list of your debts with the highest interest rate at the top of the list, and the lowest interest rate at the bottom of the list. Pay the minimums on all except the debt at the top of the list. Using any “extra” money that you have made at the end of the month, pay down that debt as fast as you can (especially if it’s over 10%).
Pay Attention to, and fix, your Credit
It’s estimated that 30% of Americans don’t know their credit score. What’s even worse is that they don’t know if they have items on their credit report that aren’t even theirs! While the credit reporting agencies are reputable, sometimes mistakes happen. But if you haven’t caught the mistakes, nobody else is going to take the initiative to do it for you.
Long before anything sneaks up on you, make sure that you are proactive with your credit and finances. This means that you will want to enlist the help of a credit monitoring service that can also help repair your credit if it has been damaged in the past. Good credit means access to better terms on future loans.
Max Out Your Savings
How much do you put away for retirement each month? How much could you put away for retirement each month? If you’re in the habit of investing $100 per month into your Roth IRA, it may be too much of a jump to hit the max ($5,500 per year, or roughly $450 per month). But imagine how much sooner you could meet your goals if you maxed everything out?
As you ruthlessly attack debt and watch it disappear, don’t blow that money on something frivolous! Instead, dump the money into your savings and retirement accounts. Every month increase what you put into your 401k and IRA until you hit the maximum.
Bonus: Invest in Yourself
When is the last time you took a class? If you’re like most, it was probably in college. When is the last time you read a book? The average number of books read per year is 6; that number is brought way up by those that read 50+ each year.
Spend some time, money, or both on making yourself a better person. Take a class, earn a designation, or even teach yourself a new language (there are a dozen apps that will help and they cost nothing). Grow personally, and you can grow professionally.
Goals are great, but without a plan to accomplish them, they are nothing more than dreams. Take a little time and make 2018 your best financial year yet. Your future self will thank you.
