The following post is by MPFJ staff writer,Laurie Blank. Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.
One of the great things about starting a new year is that it can be used as a time to make a fresh start in areas in which you may feel you aren’t functioning at optimum level. A full 25% of people made financial wellness a part of their New Year’s resolutions in 2015, according to this Nielsen article.
Most people, when asked, say that they’d love to have less debt and more money in savings. January is the perfect time to formulate a plan for turning your finances around and increasing your financial wellness. Interested? If so, here are 5 tips for creating a better financial life for yourself and/or your family in the coming year.
Financial Wellness 101
Assess Your Situation
You can’t improve your finances successfully without first knowing where you stand moneywise. Make a list of all assets such as savings, investment and retirement accounts, any homes you might own, and any large pieces of property, such as automobiles, boats or recreational vehicles. Write down:
- Name of asset or Bank name
- Type of asset (retirement, non-retirement, car, boat)
- Current worth
- Average interest rate earned
Now make a list of all debts or liabilities including mortgages, consumer debt, medical debt, etc. Write down:
- Name of debtor
- Balance owed
- Interest rate you’re paying
- Minimum payment due
After you’ve calculated your total assets and your total liabilities, you can subtract your liability number from your asset number. The answer you get is your net worth. Your net worth is an important number to know because it’ll give you an indicator of where your finances are at. From there, you can take steps to get to where you want to be.
Determine Your Financial Goals
Now that you’ve got a clear picture of where you’re at financially it’s time to determine where you want to be. What are your financial goals? Determine three short (within a year), three medium (within 1-5 years) and three long-term (longer than 5 years) financial goals, write them down and post them prominently.
Some ideas of short-term goals could be:
- Pay off “X” credit card or loan
- Save “X” amount of dollars in an emergency fund
- Save cash for an upcoming vacation
- Save cash for a needed replacement vehicle
Some ideas for medium-term goals could be:
- Pay off all consumer debt
- Save six to twelve months’ worth of living expenses
- Increase kids’ college savings accounts by fifty percent
Some ideas for long-term goals could be:
- Pay mortgage off in ten years
- Increase 401k or IRA contributions to the maximum allowed
- Save enough in a non-retirement investment to retire in 15 years
By choosing short, medium and long-term goals that are important to you, you increase chances of reaching those milestones.
Make a Solid and Doable Financial Plan
A solid and doable financial plan is one that is realistic enough that you’ll stay with it, but challenging enough that you’ll be motivated to reach it. If your goals are too audacious you’ll give up quickly, certain you’ll never reach the finish line. When it comes to successful financial plans, smaller, more realistic steps will get the job done more often.
Take Regular Steps to Achieve Your Goals
If your goals aren’t regularly at the forefront of your mind, you’ll soon forget about them. One of the keys to turning your finances around is to take regular daily or weekly steps to reach the financial goals you’ve set in place.
That might mean working side hustles to earn extra money to put toward debt each week, or working overtime at your job so that you can increase the amount of money you’re putting in your 401k. It might entail selling things you no longer use, looking for cheaper housing or any other number of things that will help ensure your financial renewal is successful. Just make sure to spend time on a regular basis looking for extra ways to help you achieve your goals.
Choose to Persevere
Perseverance is a successful key to achieving any goal. As you work to turn your finances around, roadblocks will come in the form of unexpected expenses or opportunities to spend money outside of your budget.
Choosing to persevere in spite of roadblocks – whether that means overcoming spending temptations, working to recover from a spending mistake or dealing with an unexpected expense – will help you to see that successful financial plans aren’t about not making mistakes; instead, they’re about learning to recover from those mistakes and move on.
How about you all? What steps do you plan on taking this year to improve your financial wellness? Do you have other ideas on how to improve your financial wellness that aren’t listed here?
Share your experiences by commenting below!
***Photo courtesy https://pixabay.com/en/packs-pile-money-finance-currency-163497/
