The holidays are rapidly approaching, which means New Year’s resolutions aren’t far behind. Whether you were juggling your debt load or facing worse by struggling to stay out of foreclosure or bankruptcy this past year, now is the time to make a commitment to beginning 2012 with new financial goals.
The biggest mistake people make in managing their money is failing to develop a plan. Research has shown that those who take the time to write down their financial goals are more likely to achieve those goals. It starts with a budget and making a list of all of your expenses, essential and leisure.
Prioritize your expenses from most to least important, starting with your rent or mortgage payment. Identify one or two of the least important expenses on your list and set a goal to eliminate spending on those items. It is also important to set a goal to save each month. Most people find that they can save at least 3-5% of their monthly income each month.
Now that you have a list of your expenses and identified at least one or two areas that could be eliminated, put your plan in motion. Keep track of your spending each month and put all of the money you save from eliminating the least important expenses towards paying off your debts. You will be surprised how quickly that debt balance drops when you funnel a little extra money towards it each month.
The best way to save each month is to (1) put the money into savings as soon you get your check or (2) have the amount automatically drafted from your checking into savings. These techniques help reduce the likelihood you will spend the money instead of save it. However, when it comes to savings, any amount is better than none. If you can’t make your 3-5% or more goal each month, don’t worry. Put whatever you can spare in savings at the end of the month and keep trying. You will be rewarded for your efforts when you see the balance rising.