Published On: Thu, Feb 11th, 2016

6 Life Changing Financial Resolutions to Make this Year

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macbook-924157_1920The new year is finally here and the big question is, what are you going to do to improve your life? Your finances are a big part of your life that will determine a lot of factors.

While you should always be working to improve your financial situation and set attainable resolutions, January is the best time of year to get started for most people because it symbolizes a fresh start.

After a few weeks of celebrating the holiday season in December, it’s now the perfect time to attack your financial goals with new energy and motivation. If you haven’t done so already, try to implement these six life changing financial resolutions this year.

1. Create a Realistic Plan to Pay off Debt

If you have debt, paying it off should be a huge priority this year. Carrying debt will only hold you back, and the extra interest you will pay over time if you don’t prioritize eliminating your debt will cause you to lose money.

It’s easy to get intimidated by your debt and become unsure of where you should start when it comes to dominating the repayment process. The best advice for paying off debt is to start with the balance that has the highest interest rate.

For example, if you have student loans at a 3.5% interest rate and credit card debt at a 15% interest rate, it may make more sense to prioritize paying off your credit card debt first if it’s costing you the most money. This way of thinking is often referred to as the avalanche method.

You can also pay off your debt based on the balance amount and start with the lowest balance then roll your payments into the next debt after you’ve paid that balance off. This is commonly referred to as the snowball method. Whichever method you choose, commit to it and stay motivated so you can get rid of your debt once and for all.

2. Start investing

If you want to grow your money, investing is a must. While investing offers little reward right away, it should not be put off or avoided because it will improve your financial life in the long run. A lot of people make excuses for why they can’t or won’t invest. I used to think I didn’t have enough money to set aside each month to invest.

The truth is however, you can’t afford not to invest. Instead of spending everything you earn, you can be setting a portion of your money aside to grow with compound interest. Plus, contrary to popular belief, you don’t need a ton of money to get started. You can start investing with just $100 per month. Make your financial resolution this year to contribute more to your employer sponsored 401(k) or open an individual retirement account Roth IRA.

3. Cut Unnecessary Expenses

Consider the expenses you don’t need to bring into 2016 with you. Sometimes it’s easy to get comfortable with the amount of money you’re spending on certain things instead of challenging the important of those expenses and searching for ways to spend less.

Last year, I saved more than $6,000 by becoming more aware of where my money was going and cutting unnecessary expenses. At first my weakness was spending money on cable and other forms of entertainment and dining out. I cut cable out of my family’s budget last year and started bringing my lunch to work each day and embracing unique ways to have fun on a budget.

For 2016, I’ve decided to cut my auto insurance policy down and focus on avoiding impulse purchases. While I pay my credit cards off in full each month, I’ve noticed that I spend quite a bit on them and purchase things that can be avoided. One of my main goals for this year is to work toward adopting a cash budget and minimizing my use of credit cards to cut out impulse purchases.

Once you analyze your spending along with your fixed and variable expenses, you’ll be able to come up with a few items that need to be cut from your budget as well.

4. Track Your Spending and Create a Budget

After you’ve cut your expenses, it will be time to develop a new budget. Budgeting is a common practice and even if you’ve had a budget before, it’s always best to redo your budget at least once a year. Circumstances change over time and your expenses have probably altered a bit from what they were last year.

Start this year off by tracking your expenses for a few weeks, then developing a brand new budget that allows you to live well and still meet all your financial goals.

5. Get a Raise

I recently discussed how crucial it is allow yourself to earn more money each year. If you work for an employer, you should be receiving an annual raise or negotiating a promotion. The longer you work in your particular field, the more valuable you become so there is no shame in asking for more money.

If you don’t want to wait around for someone to give you a raise once or twice a year, you can always give yourself one. You have full control when it comes to increasing your income and earning more money can probably help you reach your financial and personal goals quicker.

6. Stop Trying to Keep Up with The Joneses

Everybody has them. Whoever your Joneses are, ignore what they’re doing. Don’t compare yourself to them or anyone else for that matter. Everyone has their own situation and set of problems to deal with.

When you’re on a strict financial journey like paying off debt or saving a lot of money in a limited amount of time, it can seem like everyone else around you is having fun and living their life. It’s easy to catch yourself wondering how so and so can afford to get a new car or go on so many vacations but trust me when I say don’t even give other people’s lives that much attention.

Focus on what you can control; your own life and future and find out what makes you feel content and makes you happy without having to spend any of your hard earned money.

Are you ready to change your life for the better. Nine times out of 10, it will start with your finances and personal habits. These goals will create some pleasant changes in your life if you commit and stick to them.

What are your financial goals this year?

Chonce is a freelance writer who’s obsessed with frugality and passionate about helping others increase their savings rate, eliminate debt, and work toward financial stability. She chronicles her journey to becoming debt-free on her blog, mydebtepiphany.com.

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Source: The Money Chat

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Did you know?

African Americans are significantly more likely to have some type of debt (94%) compared with the general population (82%). Credit card debt, student loan debt, and personal loans are all significantly higher in the African American community.

Source: Prudential’s 2013 "African American Financial Experience" study