I bet you’ve got some LOFTY financial goals for next year! Saving for a house? Or maybe a vacation? Or maybe trying to pay off some debt? Creating a financial plan for the new year is the BEST way to reach those financial goals. Here’s how!
CREATING A FINANCIAL PLAN FOR THE NEW YEAR
Set Financial Goals and Priorities
I have some pretty lofty financial goals I’d like to reach. First of all, I have a lot of debt I’d like to pay off (thanks student loans). I also have a LOT of traveling I’d like to do, and that ain’t cheap!
Even though I know some of these goals are a long ways off, I want to start planning early! Seriously, the earlier you start putting money away, the sooner you reach those savings goals.
Even if you’re not saving for something in particular, although most of us are, you should be putting away money anyways! First of all, retirement. It’s not going to happen on it’s own. Plus, you want to be prepared in case of an emergency, and the money experts recommend having enough in the bank to cover 3-6 months of expenses.
Evaluate Your Spending Habits
When you’re doing financial planning for the future, I think it’s super important to first take a look at your past spending habits. Even looking at a span of just a few months can give you some pretty strong indications of your spending habits and what your problem areas are.
A lot of time when you look back at your spending habits, it’s super easy to see where you’ve been spending too much money. I used to spend an absurd amount of money on ordering takeout, and forcing myself to look back through my transactions was a good wakeup call.
I also used to spend a fair bit of money on clothes, which seems so silly looking back because I finally realized that ALL of my clothes look similar, so there was no need for me to have so many! A minimalist wardrobe is 100% easier!
Taking a look at your spending habits for other areas can also be a good indicator of what you should budget for that category, and that will help you to craft your overall budget.
Take Inventory of Your Debts
So this is obviously the least fun part of financial planning, but also super important to stay on top of! If you’re a fellow millennial, you’re probably sitting on some kind of student loan debt. You may also be working to pay off a car loan or credit cards.
First things first, just take stock of all the debt you have in whatever way is easiest for you. Maybe keeping a spreadsheet or word document helps you stay organized. Whatever it is, just make yourself aware of what debt you have and figure out a way to track it.
Then, take a look at your budget and decide if you’ll be paying just the minimum payments, or if you’re going to try to get something paid off sooner (which is obviously a good idea if you’ve got the room in the budget).
Create a Savings Plan
You’ve already set your financial goals and priorities for the year, so now it’s time to put together a savings plan to help you reach those goals. For some people, the easiest way to save for multiple financial goals at once is to set up separate savings accounts. For instance, if you’re heading off on an international vacation next year, set up a savings account just for that purpose so you can keep track of where you’re at in terms of saving for that trip.
However, while you’re saving for the fun stuff, make sure you’re also regularly depositing money into an emergency savings fund. I have an automatic withdrawal from my checking account to my savings account so I don’t even have to think about this one.
Create a Budget
Now that you have an accurate picture of your financial responsibilities and financial goals, it’s time to put it all together in a budget! After my divorce last year I moved into a new apartment and pretty much started over financially, so starting with a firm budget was super important. I wanted to be strict with myself, but also realistic and allow myself a little wiggle room in some areas.
And setting a budget is just the first step. Also, make sure you’re keeping tabs on your spending throughout the month so you’re aware if you’re going over budget. I do this myself, but apps like Mint can definitely help you with this too!
BEFORE YOU GO
Dealing with finances is never fun, but having a financial plan for the new year will be a great start to the year! I would LOVE for you to leave me a comment and let me know your biggest financial goal for the new year!
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