Easy Steps Towards Better Financial Health in the New Year
Break bad spending habits in the new year.
Breaking Bad Spending Habits
The beginning of a new year is a good time to examine your finances and put the brakes on bad spending habits.
If you’re like many Americans, you spend on average $3 per day for a cup of coffee at your local convenience store. Add your favorite fancy pastry, and it’s another $2. Now multiply that by 252 workdays in this leap year, and you’ll end up spending $1,260 for your coffee and donut fix. And if you want to indulge your taste buds with premium options at pricier coffee shops, then spending that $5 per day for a white chocolate mocha latte will cost you $1,260 a year. And what about lunch? If you spend $6 to $10 a day for lunch, that’s another $1,512 to $2,520 annually, and even more if you factor in the junk food that somehow finds its way into you shopping bag.
Of course, you have to eat, but what seems like small insignificant purchases – if left unchecked - can add up in the long run, and lead to money management problems.
“Often we don’t know how much we spend on restaurants, coffee and junk food,” says Dr. Larry Connatser, family resource management Extension specialist at the Virginia Cooperative Extension at Virginia State University. “You should have a spending plan and track your expenses so you know where your money is going.”
He recommends documenting everything you spend for at least two weeks - longer is preferred - and comparing that to your spending plan. If you’re spending more than you’re budgeting, then you need to adjust your spending.
Most banks offer apps that help you track your expenses, and there are also popular online apps, like Mint, that help you budget money and track spending.
Connatser says you should also set financial goals for the new year. Determine how much you want to save or how much you want to invest, and save for larger purchases like a car.
Most people vow to save more every new year. The best way to reach that goal is to “stop buying stuff,” he says. “It’s just that simple.”
Connatser also recommends
Know your income. Some months you will have more income, and some months you will have more expenses. Know what’s coming in and going out.
Plan for large or reoccurring expenses, like real estate taxes.
Pay yourself first. Don’t wait until the end and pay yourself with what’s left over after expenses, he says. “There will never be money left over.”
Enjoy life, go to movie, go to a play, but just plan for that.
Realize you’re not “The Joneses,” he adds. “You don’t have to keep up with your neighbors. Just because they have a new Lexus doesn’t mean you need a new BMW.”
Be reasonable and practical about your income and expenses. “Don’t frustrate yourself about the latest trends, fads or fashions you read about in a magazine.”
Communicate with your family about finances. Be sure to control your emotions when you talk about money. Don’t clam up, instead talk openly and calmly.
Teach your children while they are young about managing money.
Take good care of your health, eat good food, exercise and stay away from junk food. In the long run, it will save money.
Create an emergency fund of three to six months of income.
Evaluate and change income withholding so that you’re not paying back a lot of money at tax time or getting back too much of a refund.
Continue to educate yourself about spending habits and ways to save money. There are lots of websites with tips on saving money.