Diet. Exercise. Money. If you’re making New Year’s Resolutions, chances are it’s involving one of those topics. In a way, the key to all three of those is essentially the same: planning and discipline. Of the three, your financial health is probably the topic where you can affect the most change through the smallest of things. Of course, you’ll need to make some big-picture changes as well, but individual decisions on a day-to-day basis can be the proverbial bricks in a wall, getting your arms around your money problems sooner than you might think. Consider these key strategies for managing your money:
Get Debt Under Control: This is a big-picture one, and while it may be anxiety-inducing, it’s also one of the most important things to do. How much debt do you have? Who are the creditors? What are the interest rates? Do they offer any consolidation or payment plans? Before you can get a handle on your debt, you need to what you’re up against. Compile all of that data and look at your options. Depending on what’s available to you, it may make sense to use tools like a zero-percent credit card transfer to consolidate debt, or a personal loan through a credit union that has a low-interest-rate as a means of consolidation. Put this all together to cut your debt at a steady — not necessarily speedy — way.
Increase Credit Rating: Interest rates for things like loans, cars and mortgages are tied into your credit rating. If your debt is out of control and your payments have been hit-and-miss, then your opportunities will be limited to higher interest rates. Instead, do the smart thing and work to increase your credit score. Pay your bills on time like clockwork; don’t needlessly shuffle around debt (doing that strategically as mentioned above is acceptable, but only as part of a plan); and when you pay off a card, don’t necessarily close it out. There are many small things you can do to increase your credit rating, so in addition to “pay your bills,” the best thing you can do is educate yourself on credit-boosting techniques.
Cut Small Things: Here’s where everyday choices make a big difference. Do you get a latte everyday? That $5 drink becomes $150 a month, which becomes $1,800 a year. Things like a coffee drink, a lunch, an extra drink at happy hour all represent single pieces to a bigger puzzle. To start, make a list of things that you pay for regularly (weekly, monthly) and things that would be an occasional treat. Now tally up the total and start looking at what you really need. Remember, cutting small things is a short-term commitment to a bigger fix. In some ways, you may even be able to combine several New Year’s Resolutions into one – by making a healthy lunch instead of buying fast food, you can address health, finances and diet all at once.
Live Within A Budget: This is another subtle-but-easy shift. Give yourself a hard monthly budget — by cash if you need to, as that provides a more tangible experience to spending — and set yourself to it. This also means getting into the practice of writing down what you spent (or doing it on Google Spreadsheets or a money app) to track what you’ve spent across a month. If you see a surplus at the end, then congratulations: that money can either go towards your debt reduction plan or you can give yourself a little treat. Either way, a firm budget helps you plan while giving you a visual tracker that keeps you on course.
The key to all of this is discipline. It’s easy to make a plan and have all the best intentions, then let it slip after a few weeks. That means that the biggest component in your success or failure is you. However, these tools will help put you in a position to succeed, and you’ll find that if you can get over the hump of the first few months, working in a budget or skipping your daily latte will feel like a habit, not work–and then you’ll truly be on your path to a better life, and not just financially.