Once the New Year arrives, you’ll be bombarded with ideas for resolutions to take on. You’ll see suggestions for resolutions to improve your social life, get healthier and push the boundaries of your comfort zone. All of these ideas are great, but they can be on the expensive side. Before you tackle goals that will strain your bank account, you should consider these financial resolutions first.
Follow a Budget
Do you follow a budget? No? That needs to change!
Living without a budget can lead to all sorts of financial mishaps. You could underestimate how much you’re spending and overdraw your checking account. You could miscalculate how much you have left for your bills and collect a series of late penalties. You could burn through your entire paycheck well before your next payday and realize that you don’t have enough for your essential expenses until then.
A budget will help you determine exactly how much you earn and how much you can afford to spend every single month. It will keep your finances organized and relatively stress-free. No more going into overdraft. No more collecting late fees. No more panicking before your payday.
How can you start a budget?
The best way to do it is to download one of the top budgeting apps onto your smartphone, computer or tablet. Follow the instructions on the app and create your personal budget. Then, give it a test run. You’ll learn what adjustments you need to make with your spending categories as you go.
Make an Emergency Fund
What will you do if an emergency expense crops up? What if your toilet overflows and you need to call up a plumber? What if your car breaks down and you need to get it towed to a mechanic? What if your dog eats something bad out of the garbage and needs to be rushed to the vet? Will you be able to cover the expense right away or will you panic?
If your answer to that last question is “panic,” then you need to make an emergency fund your New Year’s resolution. An emergency fund is a collection of personal savings that you can use to cover urgent, unplanned expenses outside of your budget.
Without an emergency fund, you will have a limited number of options for handling these types of expenses. You could use your credit card, borrow money from family or try to apply for an online loan. If you’re turning to an option like online loans, search for ones that are accessible in your state of residence. So, if you live in Phoenix, look for loans in Arizona to apply for. You don’t want to waste your time scrolling through loan options that aren’t even available to Arizona residents.
How can you make an emergency fund?
Investigate your budget to see how much you can afford to set aside for emergencies. Once you determine that amount, open up a savings account — this should act as your emergency fund from this point forward. Automate your budget contributions to this savings account every month. Over time, it will become a reliable safety net.
Stop Paying Bills Late
Do you have a bad habit of paying your bills late? This is not a good habit to keep up with. Paying your bills late will result in late fees and additional penalties from your service providers. It can also hurt your consumer credit score, which could impact your ability to borrow money in the future.
How can you start paying your bills on time?
Try to automate your payments so that they leave your checking account on the days they are due. As long as you follow a proper budget, you should have enough funds in your account to cover the bills without trouble.
Tackle these resolutions and get your finances in top shape this year. Your wallet will thank you.