The New Year is here! You’ve probably made some New Year’s resolutions and there’s a good chance one or two of them has to do with money. Perhaps it’s saving more, spending less, sticking to a budget, or earning a raise. Each of these goals comes with its own set of rules or strategies, but they are all founded on some basic principles. Here is a 2.0.1.4. formula that can make your financial outlook much brighter this New Year!
2 – Accounts
There are two important types of bank accounts: savings and checking. Savings accounts are for big, future investments like college, a home, retirement, and emergencies. (You may want to have separate savings accounts for each of these categories.) On the other hand, a checking account is for daily living expenses – rent, food, clothing, transportation, entertainment, etc.
Everyone should learn to make and respect these two, separate types of accounts. Unfortunately, too many people violate this important division all too frequently. “Savings Account” is not code for “Backup Spending-Money Account.” If you overspend and have to dip into your savings account, this will put you on a very dangerous, slippery slope that can be difficult to get out of.
This is why budgeting is so important. Make a budget that allows you to take care of necessary expenses and put everything else into savings. Then never touch that savings money again except for its designated purpose. Be VERY respectful of the division of these two (or more) accounts.
0 – Debt
Debt is never good. Get out from under it as soon as possible. It takes hard work, careful planning, sacrifices, and most importantly – honesty with yourself. Believe it or not, there are a lot of “necessaries” that really aren’t necessary. Smartphones, high-speed internet, a new car, a large home, name-brand clothes – these things (among thousands of others) are really nice, but not necessary.
Be honest on what you can live without. Come up with a plan to pay off your debt and stick to it! There are lots of great ideas out there on how to cut down on costs, spend wisely, develop self-discipline, and get out from under debt!
1 – Record
In order to keep your finances in order, keep all your records in one place. It can be a checkbook, a notebook, or a computer program. If you want to stick to your budget or find a way to get out of debt, having everything in one spot will certainly help. You’ll always know where your money is coming from and where it is going. Eliminate your recording chaos and a lot of your financial chaos will disappear as well.
4 – Reviews
A lot of people find quarterly reviews of their finances helpful. Four times a year, go through your books and see how you’ve been doing. Have you been sticking to your budget? Do you have checking money left over? Did you receive a raise since the last quarterly review? Adjust your budgets or financial strategy if necessary and keep working towards a brighter future!
BY following these guidelines 2014 can be the jumping off point for many great financial years to come.
