New year’s resolutions come in many forms. For some people it’s quitting smoking, for others it’s losing weight but what about those of us who wish to create a better financial situation? If you’re looking to improve your monetary position, here are four new year’s resolutions for your budget.
- Save for a rainy day
You could get laid off, get sick or the same could happen to a family member. In order to prepare for situations like these you should be saving for a rainy day. Emergency funds can cover anything from job loss to broken appliances. If your refrigerator breaks and you don’t have the extra funds to get a new one, you’ll wish you had a rainy day fund. A fund like this should contain at least three months worth of expenses in it. If you’re lucky, you don’t have to dip into your rainy day fund and can use it in the future for a nice family vacation. However, having an emergency fund gives you peace of mind.
- Reduce your debt
Make a list of everything you owe from revolving credit to mortgage payments. Prioritize the debts with the highest interest and start paying them down then move on to everything else. Be careful with your mortgage because there may be prepayment penalties.
- Spend less than you make
This is easier said than done but, if you can manage to spend less than you make, you’re in for a sound financial future. In order to spend less, make a note of your monthly expenditures and cut out every frivolous purchase. For example, if you are spending $6 daily on coffee on your way to work, start bringing coffee from home. If you like to go out for dinner twice a week, reduce that number to once a week.
- Put away 10%
After you receive a paycheque, put away 10% of it into a savings account. If you get paid bi-weekly this shouldn’t be an issue. For those who work solely for commission or have a variable income, you may have to put away 15% because you may only receive cheques on a monthly or bi-monthly basis. Whether you get paid every two weeks or randomly, by the end of the year, you’ll have amassed a hefty sum that you can put towards your retirement.
No matter what your current economic situation is, sticking to these four budgetary new year’s resolutions will prepare you for a set financial future.