You have to be honest with yourself if you want to take control of your finances. It's like going to the gym to get in shape but lying about what the scale says…you are only cheating yourself. So, take an unfiltered financial selfie! The new year is a great time to examine your money management and look at how you can re-evaluate your spending and savings habits in key areas. And trust me, it can even be fun to get on top of your finances. Here's how:
Create A Spending Plan
Just like diet experts recommend an "eating plan" as a more sustainable long-term approach to dieting, I recommend a "spending plan" instead of going on a crash money diet. A sustainable spending plan is broken down into the three E's: "Essentials" (70 percent of your overall monthly budget for basic expenses), "Endgame" (15 percent of your monthly budget for things for your future), and "Extras" (15 percent of your monthly budget for whatever you want).
Start Naming Your Savings
Change your mindset and your finances will follow. Create "sub-savings accounts" in your bank account to save for things like "My Birthday Trip" or "My Best Friend's Wedding" or "My Broken iPhone Fund" (which is what I have). It allows you to visualize exactly what you're saving for so you're more like to feel motivated.
Make Digital Tools Your BFF
Let's be serious, life is busy. There's so much to manage. Look for digital tools that work for you proactively and give you greater peace of mind.
Work on Your Credit Score
It's your most important financial asset – it's connected to the interest rates you get on your credit cards, mortgages and car loans. It's essentially your financial report card. It's also often connected to whether or not you can rent an apartment or get a job because a landlord or employer will want to use it to determine how responsible you are. First, check it and see exactly what you're working with. Then, don't cut up credit cards, instead only put one recurring bill on them. And perhaps most importantly, pay your bills on time.
The first step to starting 2021 off on the right foot financially is proactively setting your priorities and being honest with yourself about them. The second step is making clear resolutions you can actually and want to stick to that will make 2021 your best financial year yet. You got this!
Learn about all things money, including how to invest, from financial pro Nicole Lapin in Brit + Co's The Money School.
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