How to Start the New Year with Financial Stability

With every new year comes the period of resolutions and pondering how you can be a better individual than you were last year. Many people consider finances as a part of their life they may want to refine or refresh. Finding a starting point can be tricky and may not be the most fun thing to discuss, but now is the best time to begin in order to set yourself up for a successful financial future.

Budget Breakdown

The obvious first step is to start with a budget. While creating a budget from scratch or updating a current budget can be intimidating it is important to break it down and be realistic. The different facets of your budget should include your income, spending, and savings. Start by looking at what your current monthly expenses and savings are and outline any changes that must be made. Keep in mind that these numbers may vary month to month but averaging it out will make it easier to stick to your budget over the course of the year.

For families, a budget is something that you should complete with your spouse. Having a difficult conversation about money will not only help your bank accounts, but it will also improve your relationship. Getting ahead of any arguments or disagreements by putting together a budget and sticking to it will make you stronger as a couple and better parents to your children.

Cut Out Unnecessary Expenses

Expenses are the burden of all budgets, it’s the hardest thing to look at making it the easiest to overlook. Start by identifying any monthly expenses that are a must. These will include things like your mortgage or rent, utilities, groceries, medical expenses, etc. All the things that you can’t live without. Because these are necessary expenses, you won’t be able to make any adjustments here, but you may want to deduct them from your monthly income so you know the amount of money you’re able to be flexible with.

Next look at the things that fall into the “want” category. This might include streaming subscriptions, online shopping, eating out, coffee shops, etc. Anything you consider a need that could potentially be cut out. When going through these items you’ll want to keep an open mind and be willing to reduce your spending in these areas. A great example would be to cancel any unused or unwanted subscriptions. According to The Street, over 50% of Americans are paying for unwanted subscriptions. These costs can add up and over time putting this money toward another expense or into a savings account can be much more beneficial in the long run.

Invest In Yourself

This starts with doing the research and making sure you’re knowledgeable about your investments. It can be scary and if you’re unsure where to begin you might consider the benefits of talking to a financial advisor to help you get started. Investing in yourself is the best way to be sure you’re in a good financial position. Two ways you can do this is through setting up a retirement plan and investing in insurance for yourself and your family.

Retirement

Saving for the future is crucial if you want to retire later in life. This starts with putting money into an account like a 401k or a Roth IRA that will grow over time with interest. Many companies will offer a company match into a retirement plan which you will want to take advantage of. This is typically a percentage of your income that will be put directly into your retirement account and your company will also contribute the same percent (up to the max they will match). For those that don’t have a plan provided by their employer, look into the different types of retirement accounts and choose which is best for you.

Insurance

While there are several different types of insurance plans, the most important is health insurance. This is the best way to be sure you’re taken care of and in the event of an emergency, or even just routine checkups, you won’t end up having to pay very expensive medical bills.

Like retirement, your company may also offer a health insurance plan that you can choose to enroll in during the open enrollment period, which typically occurs November through January, depending on the company. What if you miss open enrollment? Don’t stress, you are also able to make adjustments to your enrolled benefits in the event of a major life change. This includes getting married, having a child, or if you lose coverage under your parents. If and when these events occur your first step is to look over your coverage options and determine which plan is best for you.

Future Planning

Lastly, plan for the future. This can look a variety of different ways depending on your short- and long-term goals. Some examples of future planning include saving for emergencies, creating a college fund for your children, investing in real estate, fraud protection, and more. You might start by creating some financial goals to aid in your financial plan. This might include things like retirement, but it can also overlap with your personal goals too.

Whatever your goals may be, creating a plan and outlining tangible ways you can achieve success should be your first step. Having children is one thing you must plan for if it is something you’re interested in. Kids are very expensive so there’s no better time to start saving for them than now! Even if you already have children, it’s not too late to start. They will take at least 18 years of your financial support or more and the best way to prep is by creating their own individual accounts that you can contribute a small amount to monthly. This will add up and whether it’s used for college or something else, your children will be better off because of it, no matter the amount!

Keep in mind that regardless of the time of year or the stage of life you are in there is no better time to get your finances in order than now. Financial stability is something that can be achieved over time but does take work. Start small and work your way through the various elements discussed above and you’ll soon find yourself in the best financial position of your life.