3 Smart Tips to Improve Your Finances This Year

 

Anyone who has ever set a New Year’s resolution knows how exciting it can be to revel in their vision for the future. But come February, that excitement often fades into feeling overwhelmed. Although the life we want is free to imagine, it’s expensive to build. If this is the year you’re determined to get serious about achieving your financial goals, start by getting real about what it’s going to take to get there. The more aggressive you are in  taking the financial steps necessary to afford your dreams, the less  likely it is you will have to settle for anything less than what you  imagine. 

 Start with these three steps to refresh your finances this year. 

1. Take inventory of your spending.

Track your spending to bring mindfulness to your day-to-day financial habits and identify serious issues like spending more than you make.  The practice of writing down your expenses or tracking them through an  app allows you to see whether your spending is actually aligned with  your stated goals and priorities. In other words, you’ll be able to  see whether you’re spending money on stuff you don’t really care about  at the expense of the things you do. It’s far easier to make changes and  realign your spending  with your goals when you can identify exactly what’s keeping you from  reaching them. Stay accountable to those priorities by tracking your  financial inflows and outflows daily. 

2. Rethink your savings rate.

How much are you saving each month  relative to your income? Better yet, calculate your net worth as a  percentage of your lifetime earnings: Of all the money that has passed  through your hands over the course of your working life, how much of it  have you actually kept? 

 I know this can be a tough number to  look at, especially if you’ve had to pay off a lot of student loan debt  or you’ve had to deal with costly medical procedures or other  circumstances that might have put your net worth into the negative. But  taking an honest look at the numbers can offer a valuable  perspective—one that can serve as a catalyst for taking ownership of your financial future,  and for making budgeting, saving, investing and managing your money  true priorities. Moving forward, you will be able to feel like you have  something significant to show for all of the years you’ve worked and all  of the money you’ve made. Commit to a concrete increase in your savings rate. Whether it’s a 1 percent or a 50 percent increase, calculating what those added savings will afford you can serve as powerful motivation for maintaining a higher savings rate in the long run. 

3. Refresh your social circle.

It’s hard to grow into the new you while clinging to old relationships  that keep you stuck where you are. Build and foster relationships with  people who are just as motivated to achieve their financial goals as you  are. They’re far more likely to understand and support the path you’re  on, and far less likely to guilt-trip or push you into practicing bad  financial habits that throw you off course and threaten your commitment  to your desired future. By surrounding yourself with confident and motivated achievers, you’ll maximize your own opportunities to achieve your financial resolutions this year.