As another year comes to an end, now is the perfect time to look ahead to 2013 and consider how we can improve ourselves in the future. Perhaps the most common of all New Year’s resolutions revolve around health as many people resolve to quit smoking, lose weight, or exercise more.
While improving your physical health is certainly important, you shouldn’t forget about your financial health. Here are some resolutions you can make to help you save money and improve your overall financial situation in the year ahead.
Pay Down Debt
Depending on how much debt you have, it may not be possible to pay it all off in one year. But if you can at least pay off a good-sized chunk of it you’ll find yourself in a much better financial situation twelve months from now.
You’re usually better off starting with credit cards since those interest rates are higher than most other debts. But paying down student loans or even making extra mortgage payments can’t hurt either. Commit yourself to debt repayment plan and stick to it.
Pad Your Emergency Fund
Bad things happen. You get into a fender bender with someone who doesn’t have insurance. The furnace dies in the middle of winter. The water heater leaks two hundred gallons of water onto your basement floor. You pay an ear specialist $300 to pull a piece of crayon from your daughter’s ear (yes, that one happened to me).
Life is full on unexpected expenses and if you aren’t prepared for them you could find yourself in big trouble. If you keep some easily accessible cash in an emergency fund you’ll be able to pay for these unexpected expenses without having to ring up credit card charges. I keep our emergency fund in an ING savings account where it earns interest but is still accessible in an emergency.
Putting money aside in a savings account is great for short term goals like an emergency fund, but if you want to see your money really grow then you need to start investing it. Remember, saving and investing are not the same thing.
Saving is for short term obligations and goals where the most important thing is to keep your funds safe. With investing, the goal is to let your money grow. You don’t need much to start investing with a low cost index fund or even a discount broker. If you don’t think you can find money to invest each month, you can always…
Eliminate Recurring Expenses You Don’t Need
Still paying for that gym membership even though you haven’t worked out in six months? Do you really need the premium movie package plus Netflix, Amazon Prime, and Hulu Plus? Can you live without the newspaper subscription and just stick to the free online version? Most of us have at least a handful of recurring expenses that we can cancel without feeling deprived.
When we moved last summer I just couldn’t believe how much “stuff” we had tucked away in the basement, garage, and attic. We donated tons of clothes to charity, held a garage sale to make some extra money, and threw away more garbage than I could have imagined.
Most people don’t stop and think about the cost of clutter, but if you’re paying $150 a month for a storage unit, that’s $1,800 per year that you could be investing and growing for your future.
Find a Side Gig
I am a firm believer in income diversification and I think everyone should have a side gig to help supplement their income. What kind of side gig you choose is up to you. People make money in all sorts of unusual ways…just look at some of these weird Fiverr gigs as proof.
If you don’t want to wear a banana costume or pretend to be someone’s girlfriend, there are plenty of other ways to make some extra money. If you’re a teacher that specializes in a certain subject you can tutor students on the side. If you’re an artsy type, you could sell some of your crafts on Etsy. If you’re good with words you can make money writing articles online. Of you can just get a part-time job somewhere.
It doesn’t matter which side gig you choose. The most important thing is that you increase your income so you can reach your financial goals that much faster.
What are your resolutions for the new year?
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