Recently we talked about making resolutions to promote financial health in the New Year. For any resolution to be successful, though, you need more than sheer willpower alone – you need a smart, strategic plan. Read on for specific steps you can implement today to whip your finances into shape.
- Get a sense of your financial status.
If your resolution were to lose weight, first you’d step on the scale. If your goal is to become a faster runner, you’d first need to clock your mile time. You can apply the same logic to your financial makeover. Make a list of all your accounts, assets, and debts: this will give you a snapshot of where you stand financially, and it is a good reference to have on hand. Once you know where you’re starting from, you’re well-positioned to set smart goals and work out a plan to reach them.
- Track your expenses for a week or a month.
Write down everything that you spend, and all your bills. That way you can really see what money is coming in and what money is going out. This will give you a (sometimes surprising!) snapshot. To implement a financial fitness plan, you’ll want to understand your old habits so that you can prepare for success in creating new ones. Think buying healthy snacks and finding recipes to cook at home instead of stocking a pantry full of unhealthy choices. With a solid understanding of where, how, and when you tend to spend, you can clearly identify which money habits to target with smart changes.
- Decide on a healthy goal and a realistic strategy to attain it.
Once you have a goal in mind, sit down and map out the specific steps you’ll take to get there. Sticking to a realistic budget is like maintaining a healthy lifestyle while allowing for the occasional treat. It’s important to focus on all the positive steps you are taking to strengthen your financial health – not to feel deprived by penny-pinching. Part of that is following a plan, like the 50-30-20, that allows you to take care of expenses, save for the future, and live today.