Being frugal is all the rage right now. But the days are coming where spending and running up debt will be vogue again. So now is the time to get your finances in order, so when that day comes you know where you stand!
Pamela Yip of the Dallas Morning News wrote a great piece on “Money Lessons for the New Year.” I wanted to give you the high points of the article. As you begin spending in the new year, here are the things to think about:
1- Examine Your Goals. You need to have clear cut goals for your finances. It’s easier to save money if you have an end dollar amount in mind, or something you are saving it for. For me I want to put in an energy efficient sliding glass door in my living room. So I priced them, and now I have a dollar amount to work toward.
2- Set Up a Spending Plan. Give yourself an allowance of “fun money” every pay check. Most people recommend to take it out in cash and keep it in an envelope. Once you run out of cash, no more costly fun money until the next paycheck!
3- Pay Down Debt. Credit card debt is evil. And if you don’t think that now, wait until you see what happens in February of this year when the new legislation goes into effect. Issuers are raising interest rates, increasing fees and cutting credit limits in response to the new laws. Keep an eye out in the mail for info from your credit card company. Pay those cards down as quickly as possible.
4- Boost Your Savings. If you don’t have a savings account, try to get one set up. In addition if your employer will let you, set up an automatic draft to go into that savings account on the day you get paid. Even if you only set aside $1 a day for a year, you will have $365 at the end of the year, plus any interest you earn. That can help you breathe a little easier when you need a new tire or your electric bill turns out to be more than you thought!
5. Have an Emergency Plan. Jobs come and go. If your household ends up losing income, having a plan how to survive is pivotal.
6. Be Honest. This is a big one. If you have never sat down and really looked at your spending and savings, it’s time. Denial is not your friend when it comes to finances.
7. Focus on the Long Term. Most people who bailed out on their 401k would have seen some growth now. People who have continued to invest while the market was down are also very likely to have seen some growth. If you have the time, invest your money and forgot it. When you are 10 years away from retirement, then maybe look at some more conservative options.
Just my two cents, but it could end up being extremely profitable!