Finances are a big consideration always, but especially during the holidays. They can be stressful, especially with all of the extra expenses. Between travel, gifts, and of course, the washing machine that breaks the week of Christmas, there are some expected and also some unexpected expenses. And it seems that no matter your income level, most of us are affected in some way by financial stress.
Add to that the topsy-turvy political climate, and you might find yourself walking into 2018 unsure of where you stand. And when you have debt from the previous year you’re trying to contend with, its really hard to even imagine paying off your mortgage, saving for your kids’ college, or saving for retirement. Finances dictate many of our decisions, even when we don’t want to factor that in.
But if you’re like us, and you want to start 2018 with a fresh perspective, and less anxiety about money, try these 6 steps inspired by savvy financial gurus.
Build an Emergency Fund. No matter what finances guru you look to, whether its Dave Ramsey’s The Total Money Makeover , or Suze Orman, the first thing you need to do is save. Your emergency fund provides you with the cash to pay for the broken washing machine, or living expenses if you were to unexpectedly lose your job. By having this money set aside, the anxiety over the what-ifs significantly diminishes. The recommended amount? 3-6 months of expenses. Give yourself a goal of getting your emergency fund fully stocked by a certain date and then see where you can trim, move, sell, etc. to get yourself there. Even just setting aside $20 a week can be helpful.
Spend less. Ha! This seems oh so easy, but will ultimately have the biggest impact on your stress level. When there is surplus at the end of the month, its much easier to set aside for the BIG things like retirement, college, or saving for a fun vacation. When you’re tempted to buy something that’s out of your budget, remind yourself that the stress of having that item is probably not worth it. They key to healthy finances is living below your means.
Save more. Americans are terrible at saving. If you can think of your savings as another bill to pay, something that’s not optional, it can make it more of a lifestyle change. Set another goal here and see if you can surpass it by the end of the year. What would it look like to set aside 10 percent of your income?
Meet with a Financial Advisor or Create a Financial Plan Yourself. There are a lot of budget tools available out there, including one on each of the sites we mention above. After you’ve set a budget, try to set longer term goals, including how you’ll be able to pay for the future you envision. Don’t let your future be an afterthought. After you’ve made longer term goals, take the goals into five-year increments. What do you want to accomplish, do, get out of life in the next five years? How can you get there? And keep in mind the things that you need in your budget. We love this list from the Art of Simple. What are your must-haves?
Eliminate debt. This goes back to the holiday spending. Most Americans go into the New Year, every year, with some kind of credit card debt. Credit card debt is the most expensive debt for consumers. The average interest rate according to Orman is 15 percent and rates are expected to rise in 2018 if the Federal Reserve continues to raise its target interest rate. Commit yourself to a payback period. This calculator can help you figure out how long it will take you to pay off your credit card. It also helps you see what happens if you only pay the minimum, if you pay a set amount each month, or if you want to have it paid off by a certain date. If you have debt on multiple cards, pay off the highest interest rate card first. Throw everything you can at that one card and pay the minimum on the others. As you pay off cards, you’ll be able to follow the snowball effect, having more money for each card as you go. If you have a lot of credit card debt, looking into a personal loan can be a good option. Personal loans typically have fixed rates and terms and strict payment schedules, making the loan less costly than carrying a credit card balance.
Find Money. This is a big one for those that follow Ramsey’s advice. He recommends everything from a garage sale, to skipping your $4 coffee runs. You can find money by not spending money on things that aren’t essential, i.e. home décor. You can also find money by selling items you’re no longer using. And finally, you can create more income by adding a side job to your current job, or starting your own business.
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