With tax season in full effect, it’s the perfect time to get personal finances in order. These five simple steps will help start the process of building long-term financial wellness, security and success.
Follow your money trail
Swiping the card, buying online, and simply feeling too busy to track spending can lead to a lack of financial awareness and added financial stress. The first step to managing finances is having a clear picture of income versus expenses. Simply knowing where you stand immediately reduces stress and increases the chances of smart financial decision-making. Whether using pen and paper, Mint.com or your bank’s mobile app, make it a priority to track spending, assess money leaks, and build and manage a realistic budget based on accurate information.
Set S.M.A.R.T financial goals
Declaring to pay off debt once and for all is great, but requires a solid money plan in place. When developing a financial goal, make it specific, measurable, attainable, realistic, and timely. Instead of, “I absolutely must obliterate all debt this year even if I subsist on ramen noodles,” try, “I will pay off my $3,000 credit card bill in 18 months with monthly payments and no additional charges.” It also helps to break down goals based on dates and priority level to understand action steps and outcomes for each week, each month, or each year.
Trim non-essential expenses
To reduce spending, spot the easy cuts first. Identify what services or products are either not necessary or not being used. Subscribing to channels that aren’t being watched? Paying for a gym membership that’s not being used? Recurring costs like these can eat up a budget over the course of a year and deter from one’s desired financial goals.
Expect the unexpected
Whether it is appendicitis, surprise weekend guests, or a clogged toilet, life happens. Unexpected expenses will always be an issue, but an emergency fund helps prevent those additional costs from destroying a budget, depleting long-term savings, or causing a complete financial breakdown. Take a look back to see how much those surprise costs average each year or each month. Then, account for that amount in future financial planning and budgeting.
Create a cookie jar
While being on top of a budget, having an emergency fund, reaching financial goals and planning for the future are all important, make sure to leave a little wiggle room for fun. Maybe it is setting aside $15 a week for a family fun fund, or sending mom some surprise flowers. Part of building financial wellness is establishing a healthy relationship with money, and using it to facilitate a life that brings you the most joy.