You have decided that this is the year that you will finally put your financial affairs in order. You are determined to clear up your bills and start putting savings aside. While these are worthwhile goals, you need to devise a concrete plan to make them work.
A good place to begin is with an assessment of your previous year’s expenditures, including credit card spending, unsecured personal loans, mortgages and other financial obligations. Project an estimate of your expenses for the upcoming year and balance your expected expenditures against your projected income. If your income falls short, use these personal finance tips to begin to get your finances into shape.
Gauge Your Obligations and Overall Financial Standing
It is nearly impossible to devise a workable budget unless you know exactly what your financial obligations are. Make a list of every bill that you must pay every month – not just the big ones such as rent or mortgage and heating bill but also an estimate of what you spend each morning for coffee and sweets on your way to work. You may be surprised by just how much you are spending.
Did you improve your financial standing last year or did you lose ground? Gather your bank statements and payment receipts to determine where you stand in terms of your overall financial circumstances. Even if the results are painful to face, doing so can help you begin to move things back in the right direction.
Set Your Priorities
Do you want to be completely debt free over the next twelve months? Do you wish to finally stop renting and purchase a home of your own? Set one or two major financial goals for the year ahead. For instance, if you want to become a home owner, determine how much you will need to put aside for a decent down payment, and then divide the amount by twelve so that you will have met your goal by the end of the year. Place a picture of a home that resembles your dream home in a prominent place where you will see it often. Setting big goals and placing reminders in obvious places will serve to motivate you to keep moving ahead whenever you become discouraged.
Update Your Household Budget
Of course, you’re not still budgeting for diapers when your youngest is set to take school leaving exams. Nonetheless, your household budget may still contain outdated items. Taking regular assessments can help you determine your family’s priorities while eliminating unnecessary spending.
While you’re updating your budget, include an assessment of any loans that you might have. If you have a home loan, you may be a candidate for refinancing at lower interest rates. Determine whether it is possible to accelerate your repayment schedule so that you can become debt free sooner.
Plan for Contingencies
No one likes to consider that a disaster or tragedy may strike. Nonetheless, setting up an emergency fund and writing a will should occupy top priority on your list of financial and personal goals for the coming year. Having a will provides concrete instructions for providing for dependents and ensuring that your final wishes are carried out. As for an emergency fund, start small. Set aside something each week until you have accumulated at least enough to cover your expenses for three months.
William Caine is a veteran of finance. He enjoys blogging about the ins and outs of savvy personal money management.