PERSONAL FINANCE

While many people’s new year’s resolutions focus on personal health and wellbeing, it's important to also consider your financial wellbeing. According to Dana Peterson, Chief Economist at The Conference Board, people should focus on budgeting, saving, and paying off their debts.¹

Here are five ways to help you do just that.   

1. Make a seasonal budget

The holiday season can be a costly time for families when compared to the later, quieter winter months. Summer can also be an expensive time for young professionals, couples, and families alike, who tend to go out and spend more and take vacations.

Alongside a list of your fixed expenses like mortgages and utilities, setting a seasonal budget can help you account for changes in periodic spending. Once you’re aware of the peaks and troughs, you could plan ahead to spend more sensibly during costly times and save more during less expensive periods. You can also make sure you have enough funds for big seasonal events like birthdays and anniversaries, back-to-school, and holidays like July 4^th or Labor Day.  

2. Review often and adapt

Eighty-three percent of Americans overspend.² Keeping an eye on how much you’re spending and on what, and whether you’re saving enough, can help you manage your finances more effectively. Actions such as regularly checking your accounts, categorizing and assigning certain purchases to expense pots, and setting maximum spending or minimum saving limits can help you stay within budget. 

If you’re spending too much and not saving enough, identify areas where you could cut back. To meet your financial goals, you might have to limit how often you eat out or reduce your retail or grocery budget. And if your credit card bills are causing concern, think about how you could decrease spending – either by cutting back on transactions or sticking to your debit card when possible.

3. Be realistic about spending and saving   

Setting the right expectations can help you better understand your finances and improve your relationship with money in general. Sometimes it’s better to overestimate how much something like a summer vacation is going to cost so you’re not caught out by additional costs. Then if it’s cheaper than anticipated, you can save the difference. Similarly, you might want to pay a certain amount off your credit card bill each month. Consider what’s realistic so you don’t get demoralized, and then gradually increase the amount if you can.  

By being realistic about your ability to spend and save, you’ll have a better understanding of how much things cost and what you can and can’t afford. It’s also important to account for inflation, a persistent concern for many Americans – 34% say they are struggling with the cost of living.³

4. Don’t spend what you can’t afford

Overspending during certain periods like the holiday season can be all too easy. Likewise, if you want something you can’t afford, it can be tempting to spend now and either spread the payment or repay later.

But it’s important to understand the implications of too many big or ongoing purchases, especially during times of high inflation. You could end up going overdrawn consistently each month, spending credit that will cost you money and take time to repay, or committing to future payments that catch you by surprise.

Consider whether your budget can handle bigger financial commitments, and how often. Accumulating debt can happen quickly, so minimize hefty purchases to keep your finances under control.  

5. Pay credit card bills on time

Mounting credit and ongoing debt can create a lot of financial worry. Forty-four percent of Americans use credit cards to cover costs when they go over their monthly budgets.⁴ So, to avoid it getting out of control, make a plan to manage your credit.

Paying off the full balance month by month is the best way to maintain a healthy credit score and avoid paying too much interest. But for those who can’t afford to, ensure you make a minimum payment each month, and on time, otherwise you may face extra charges.   

Before committing to a lower or higher credit limit, it’s also useful to work out how much money you can afford to borrow and how long it will take you to pay back.

Moderating your spending habits can have a positive long-term impact on your finances. Why not start now in the new year? Budget looks good? Think about saving for retirement –  an ongoing resolution that will futureproof your finances.

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