The beginning of a new year is the most popular time to set goals and make plans, and everyone’s resolution list should include a few financial resolutions.
Resolutions, like goals, are best when they’re specific. If getting your financial life in order is a resolution for you this year, here are eight very specific things you can do to help you get there faster:
1) Save 15% of your gross income.
Most people say they want to save more, but don’t know how much they should or where to should save it. Shannon McLay, founder of The Financial Gym, says, “The first goal is to set a savings goal. We start with 15% of their gross monthly income. If you make $60,000 a year or $5,000 a month, your savings goal is $750 per month. Many of our clients panic when they see their savings goals, but it’s just because it’s not something they’ve tried to do before.”
The best way to achieve this goal is to set up an automatic transfer from your checking account to your savings account for this amount every month. If you need the money to pay bills, you can always transfer it back, but challenge yourself to live off of what’s left after your automatic transfers happen. It’s a sneaky way to save, and works for 90% of people who try it.
2) Monitor your credit score quarterly.
The recent Equifax information leak should keep everyone on their toes about monitoring their credit. You can freeze your credit or try other monitoring services, or you can easily and cheaply monitor it yourself. Set a calendar reminder for every two to three months to review your credit score for any changes of activity.
If you have credit cards with American Express, Discover, Bank of America and others, you can check your FICO score for free at any point. The sooner you uncover any problems with your credit, the easier they are to fix, so it’s important to make this a regular part of your financial health routine.
3) Invest monthly.
Just like saving regularly, you should set up a regular process by which you invest your money. Money sitting in most bank accounts is earning less than 1% and inflation is 2-3% which means that every day your money sits in a bank account, it loses 1-2% of its value. You don’t need a lot of money to start investing as there are apps that will let you invest with just five dollars or less; and they make it easy for you to automate like Acorns, Stash Invest and Betterment that help you automate your investing and set up a regular schedule.
If you’ve funded your emergency savings and you feel prepared for your near term goals, then you should take advantage of retirement savings options you may have through your work like 401ks or 403bs or on your own like IRAs or Roth IRAs. If it’s through your company, you can automate your investing easily through payroll deductions.
4) Create a debt plan.
If debt has been a constant problem for you, make 2018 the year that you start to tackle it head on. Paying down debt is like climbing a mountain, it’s going to take time and strategy and the only way to get to the top is to start climbing. The first step is figuring out your total debt, the type of debt you have and what the interest rates are on your debts. Put all of this in a spreadsheet. It’s like stepping on the scale when you know you’ve had too much to eat; however, it’s critical in creating your plan to get rid of it.
After you’ve figured out your interest rates, look for ways to consolidate your debt or lower your interest rates either through 0% balance transfer credit cards, personal loans or student loan refinance options. Once you have all of the debt and interest rates set, pick the best repayment strategy for you. Some people like using the debt snowball method where you pay the smallest debts off first while others like the debt avalanche where you pay the highest interest rate debt first.
5) Track expenses daily.
The best part of the Weight Watchers program is that it forces users to track the food they eat. You can do the same thing with your money. There are a number of free apps like Expenses OK or Spending Tracker that can help you with expense tracking simply put it all in an excel spreadsheet every day. The best part about expense tracking is that it will make you more mindful of your money and force you to start to think about how you spend it.
6) Try a monthly savings challenge.
Anyone can do anything for a month, so try one of the numerous monthly financial savings challenges that are out there for at least January or maybe try another one in February. You can search for savings challenges and find your options on Pinterest or personal finance blogs.
7) Go on a cash diet.
If you spent a bunch of money on your friends and family this holiday season and you’re credit cards have a little extra meat on them, then try a cash diet for the next few weeks or months. Limit yourself to a certain amount of money every week, (typically around $50-$100) and see if you can live off of just that amount every week. Mindfulness of your money is a large component to getting financially healthy, and nothing will make you more mindful of your money than cash.
There is neurological research that has proven that when we swipe debit and credit cards, we literally shut our brains down and we don’t process what’s happening. When you use cash, you’re forced to keep your brain engaged whether it’s counting the money to pay it out or realizing that you’re about to run out of it and have to change your plans. Cash diets are great ways to keep your spending under control and increase your money mindfulness.
8) Schedule Weekly Financial Exercises
Just like there are physical exercises for our bodies, there are financial exercises for our balance sheets. Like you’d schedule time in your calendar to exercise your body, schedule time in your calendar to exercise your financial health as well. For the best results, I suggest trying a financial exercise two to three times a week on a regular basis.
Excerpts printed from Forbes Magazine.