It’s hard to believe, but January is here—and with it, come countless resolutions for the year ahead. I know, I know, most of these are ditched in just a few weeks, but that’s why I’m here: to help you make and actually stick to your money resolutions. I created LearnVest—one of the leading personal finance companies online—to help you make progress on your money. We connect our members with a dedicated Certified Financial Planner who create a custom financial plan for you, tell you exactly what you need to do, and then hold you accountable.
So what money resolutions should you consider?
#1: Get a Financial Plan.
Not having a financial plan is a plan—just a really bad one. Whenever you want to reach a goal, you need to have a roadmap in place. Now is the time to pin down where you are today, and where you want to be in the future. What do you want to accomplish by the end of the year? How about in the next five years? Paying down debt? Buying your very first home with your hubby? Dream a little!
This can be a daunting task, so if you’re feeling stuck/intimidated/just want a second set of eyes, you can talk to one of our LearnVest Experts for a free check-in. Just sign up for a time that works for you.
#2: Stick to a Budget.
If you hear budget and immediately think “deprivation,” think again. A budget is a way to keep your money extra organized. I love the 50/20/30 budget formula, because it helps you divvy up your take-home pay. 50 percent of your take-home pay is for essentials (housing, food, utilities, transportation to work), 20 percent is for your future (savings, debt repayment, mortgages) and 30 percent is for your lifestyle (all the fun stuff—travel, gifts, shopping).
Once you figure out how your expenses can and should line up, keep an eye on your spending with a free online money tools, like LearnVest’s Money Center. If you want to track your spending on the go, we even have a LearnVest app (on both iPhone and iPad). You can see all of your transactions in one place and make sure you’re on track.
#3: Raise Your Credit Score.
Your credit score is perhaps the only grade that matters after school! Start by checking your score at a free site like CreditKarma.com. You should aim for a score north of 760. If you’re not there yet, don’t worry: there are steps you can take to improve it. For starters, make sure you never cancel your oldest card (credit card history helps!) and make sure to always pay your bills on time.
#4: Have the Money Talk.
When you’re in a relationship, money should be a team effort. Set aside time for a money talk with your significant other to make sure you’re on the same page. Get the conversation started with a check in of how you’re doing, and more importantly, what your shared goals are. Make sure it’s a relaxed time when you can both be 100% focused on the conversation at hand.
#5: Save More.
Building a nest egg for yourself—what I like to call a “Freedom Fund” with at least 6 months of your take-home pay saved up—is an important step to take in establishing your financial security. So how do you get there? Check out this excerpt from Financially Fearless to get started:
“If getting six months of take-home pay together seems daunting, here are eight tricks:
1. Direct Deposit Into Your Savings
This is my personal favorite! Think of yourself as a regular monthly bill you have to pay. All you have to do is arrange to have a set amount of money directly deposited from your paycheck into
savings account each month.
I recommend using a separate savings account because if you have access to your funds in your checking account, you’re more likely to spend them. Again, it might hurt a bit at first to take home a little less every month, but trust me, after a while you won’t even notice it’s gone. Here’s a moment when the “set it and forget it” strategy works wonders.
2. Never Spend a Bonus Again
It feels great to be rewarded for your hard work. And it feels even better to spend that hard-earned bonus on something you’ll enjoy, like a trip to France or an iPad. At the same time, the pleasure of a vacation or new gadget is short-lived compared to financial security. So make a pact with yourself to put every bonus you get from here on out to good use. If you direct 90% of your bonuses straight into your savings account as a rule, you’ll still have 10% to treat yourself with (plus the comfort of knowing that you’re building a well-earned safety net). I live by this rule.
If you get a cash-back reward for any spending on your credit card, just make it a rule that those dollars will be dedicated to your freedom fund.
3. Go Nuts Cutting Your Unnecessary Costs
O.K., O.K., this seems like an obvious one—and easier said than done. Actually, most people spend money on more unnecessary items than they think. So take time to look at where your money is going in detail and begin to cut back. Saving $10 here and there could help you put a lot away in the long run.
4. Open a Seasonal Savings Account
Many banks offer seasonal accounts meant to save for holidays like Christmas. These accounts give you reduced access to your accounts, charging a hefty penalty each time you withdraw more than permitted. Since emergencies don’t occur often, a seasonal account could make sure you’re touching it only when needed (just make sure you’re not tempted to blow it all on Christmas gifts).
5. Sell Unused Items
I love this one. Chalk it up to my massive craving for organization, but I’m all about getting rid of things I no longer use. Rather than throwing these unused goods away, start selling them, and put that money into your emergency fund. All you need to do is post them to a site like eBay or Craigslist or Amazon and you can get rid of items from the comfort of your home. You can also take your clothes to a consignment shop to have them sold for you.
6. Stop Spending $5 Bills
Instead of saving your pennies, put aside any $5 bills that come your way. Never spend a $5 bill again, and you’ll be surprised by how quickly this silly trick will help you come up with a few hundred dollars to add to an emergency fund.
7. Earn Extra Income
You could pick up odd jobs via websites like TaskRabbit.com, DoMyStuff.com, Elance.com, FreelanceSwitch.com, or Sitters.com.
8. Use “Cash Back” Rewards
If you get a cash-back reward for any spending on your credit card, just make it a rule that those dollars will be dedicated to your freedom fund. It may only add up to $100 extra each year, depending on your spending, but every little bit counts.
This is the year you become Financially Fearless. I feel so passionately about the topic that I just wrote a bestselling book on it! If you order a copy and send us your receipt (to [email protected]), you’ll get access to a VIP virtual Book Club with me and the editors of The Everygirl. Together we’ll answer your money questions and make sure your 2014 is more track than ever.
Reprinted from the book “Financially Fearless: The LearnVest Program for Taking Control of Your Money” by Alexa von Tobel, CFP®. Copyright 2013 by Alexa von Tobel. Published by Crown Business, an imprint of the Crown Publishing Group, a division of Random House LLC, a Penguin Random House Company.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc. that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third-parties listed, discussed, identified or otherwise appearing herein are separate and unaffiliated and are not responsible for each other’s products, services or policies.