There are a lot of smart money decisions you can make at the top of the year to help you dictate a good start for your finances. A lot of people typically put together a list of certain areas in their life they want to put an effort to change for the better. A lot of these resolutions also serve as your blueprint on how you want to do better as the year progresses.
This endeavor will also help you stay away from money mistakes you have to avoid at the beginning of the year. These financial missteps will make it a lot more difficult for you to start the year right. Here are a few things you can look into to help you make better money decisions once the new year starts.
Refocus your household budget
One of the smart money decisions you can make at the top of the year is to refocus your household budget towards your goals for the year. The challenge is that not a lot of people believe they need a budget to manage their finances every month. HFCU shares that only about 41% of Americans say they use a budget which should not be the case.
There are some people who try and budget mentally but this is a challenging task. This is because there are too many details to worry about and you run the risk of overlooking one or more details. Once this happens, you might start to miss payments or underpay some which could both lead to unnecessary fees and penalties.
You have to remember that your household budget is one of the most important financial tools you need to stay on top of your finances. It provides you the ability to be able to make informed financial decisions at any given time. These money adjustments will help you steer your finances in the right direction given all the changes life throws your way.
Pay down high-interest loans
CNBC shares that credit card debt surpassed the $1 trillion mark at the start of the year which is almost the same level as it was before the 2008 recession. This can either be interpreted as consumers being careless with their spending or that the market is gaining traction and consumer confidence is at an all-time high again.
Regardless of what the reason is, credit cards normally carry the highest interest rate in your payments. This makes it one of the smart money decisions for the year if you can try to pay it off as fast as you can. Paying more than the minimum helps you manage your payments faster and can help you stay away from charges down the road.
It is not only credit card payments you have to think about because there are other high-interest loans you might be in the red for. If you have payday loans, you need to settle and pay that down as fast as you can because it also has high-interest as well as charges and penalties in it. If you borrowed money from a family member, you need to pay it off as well even if they are not asking for it yet. It may not have any interest payments but you might lose more than just money when they start to resent you for not paying back the money.
Max out your 401(k) contribution
One of the smart money decisions you can make for the year is to think about your future self which is usually about your retirement years. If you want to enjoy retirement, you need to plan for it as early as possible. The best time to save for it was yesterday, the next best time is today so you need to include it in your new year plans.
If you want to plan for retirement, your 401k is a good place to start especially when your employer offers a matching program for your fund. This basically means that the company you work for is willing to match your 401k savings up to a certain extent. This is already free money on the table you need to take advantage of.
If your finances will allow, max out your 401k contributions every year so you can take full advantage of the program. The more you put in, the higher the match your company makes. Just make sure that take note of the vesting period your company has over your 401k in case you decide to resign and start working for another company.
Earn from your hobbies
It is always a good idea to try and increase your income to give you more room to move around. It is considered one of the many smart money decisions you can take on for the new year. However, this is easier said than done and you might quickly find this goal exhausting as you try and add more work to earn more money.
One of the ways to go about this is to look at your hobbies and identify ways how you can earn from it. Income-positive hobbies can help you earn money on the side better. The reason for this is that you are engaged in an activity that you already love doing. It helps push you to do more and improve your skills as well.
If you love to paint, why not offer your services to businesses around you for custom artwork. It can be for their office space or for their restaurants. Baking can also serve you well if you can sell your creations to food establishments near your place. You can also try to get into buying and selling of books if you love to read. The list is endless and the challenge is identifying how you can earn from your hobbies.
Commit to a healthier lifestyle
It might not directly relate to your finances but one of the smart money decisions you can make in your life is to create a healthier lifestyle. This is important as HHS shares that less than 5% of American adults have at least 30 minutes of physical activity each day. This is way below what people need to keep their body and mind healthy.
The good thing about this is that you do not have to spend a lot to live healthy. It takes time and a lot of commitment from you but signing up for a gym membership is not always the best-case scenario. There might be times when you would not feel up to it to go to the gym for weeks which could turn to months. You wasted the money you used to sign up as well as the new clothes and shoes you bought for the gym.
One thing you can do is start stretching exercises as soon as you wake up. Then add a few exercises you can do right in the comfort of your own home like jumping jacks or even push-ups. On weekends, you can go out for a run or a bike with people you know. Look up your local park and find out if there are any free exercise classes offered on specific days. Be creative and find something you love doing so you can keep at it longer.
It is important to make smart money decisions at the start of the year because it can help bring you closer to your financial goals in life.