Many people are making resolutions and goals this time of year.
We are encouraging everyone to make one of those goals improving their finances in the new year.
Today we have seven different suggestions for how you can improve your finances this year.
These ideas can serve as practical ways to go about improving your finances in the new year.
1) Evaluate Your Debt
Most people have a general understanding of their money and other assets. We keep tabs on our checking and savings accounts, check our retirement accounts from time-to-time, and typically have a good idea of what our house, car and other assets would sell for.
Debt is another story. Most people do not have a detailed understanding of their debt.
A simple way to do this is to create a spreadsheet that holds the following information: type of debt, debt holder (what company you make payments to), amount, interest rate, and term (i.e. how long until the debt is gone?).
Whether it’s credit card debt, student loans, mortgage, auto loans, or other personal loans, evaluating and getting a good handle on your debt is a good way to improve your finances in the new year.
2) Automate Retirement Account Contributions
As I’ve said in the past, the best retirement savings strategy for millennials is this: get started. Especially in your 20s and 30s, it’s important to simply get started. The easiest way to do this is through a company 401k or an IRA.
Once you are signed up for a retirement account the next important step is to automate contributions. If this is a company 401k, it should be easy to assign a certain percentage to be withdrawn from your paycheck and put into your 401k. If you have an IRA, set up automatic contributions out of your checking account (weekly, bi-weekly, or monthly).
If you don’t already have regular, automated contributions being made to a retirement account this should be one of your first priorities for improving your finances.
3) Contribute to a Health Savings Account (HSA)
Many people are completely oblivious to the advantages of their Health Savings Account, or HSA. I recently argued that the HSA is the best retirement account. It’s superior to both an IRA and 401k for a number of reasons.
If you have an HSA and haven’t contributed to it in the past, start contributing the max. In 2015 the allowed contribution for an individual is $3,350 and $6,650 for a family. Money contributed to an HSA is tax-deductible and is not taxed when withdrawn for qualified medical expenses. There is also no “use it or lose it” restriction on HSA funds; you keep every dollar you contribute.
The biggest incentive for contributing to an HSA? It creates a medical emergency fund. This will help buffer your finances from the new higher deductibles and out-of-pocket maximums that many health insurance plans are moving towards.
4) Get Life Insurance
I’ll be the first to admit how easy it is to put off getting life insurance. It’s easy to make life insurance a low priority, especially if you’re a millennial in the early stages of their career.
I first learned about life insurance reading Suze Orman’s The Money Book for the Young, Fabulous & Broke (which I highly recommend). At the time I was in college and while I was in a relationship at the time, no one financially depended on me. Now that I’m married I can’t think of a worse situation than me passing away and leaving my wife on the hook for student loans, car loans, and our mortgage.
I tend to side with Suze Orman in her belief that you should take out more life insurance than you think (i.e. more than your current debt level). You have no idea how a premature death will affect your partner. They may be unable to work and it could take them a long time to recover.
In a nutshell: take out life insurance, and take out a lot of it. If you are interested in looking at your options in an online marketplace, check out my post The Fastest Way to Get Life Insurance.
5) Churn a Credit Card for Rewards
Warning: this strategy is only for those who do not currently have credit card debt and who do not struggle with misusing credit cards.
One fun way to improve your finances is churning a credit card for rewards. In case you aren’t familiar with the term, “churning” a credit card simply means signing up for a new credit card for the sign-up promotion with the intention of closing it once you have cashed in on the reward.
Last year both my wife and I churned the Barclaycard Arrival Plus World Elite MasterCard and reaped the $400 sign-up bonus. This is one of the cards I shared in my recent post 5 Best Travel Reward Credit Cards for 2015. It’s truly amazing how much money you can save on travel when you utilize credit card rewards.
Doing some research can really pay off in this area. I saw a promo for a Sun Country airlines credit card that essentially gives you a free round-trip flight after you spend $500 (within 3 months) on the card. This isn’t a deal that is typically written about on blogs because there is no affiliate program attached to it and Sun Country is a smaller airline.
6) Commit to Analyzing your Spending
Everyone has heard it at one point or another: track your spending. The most difficult part of tracking your spending is getting in the habit of doing it.
While it may be possible to have a general idea of how much you spend each month without recording all your spending, it’s pretty tough to have a good understanding of your spending habits without recording every dollar you spend. Tracking your spending allows you to review your spending over time and make changes as you see fit.
I personally use Microsoft Excel to record my wife and my spending patterns. Others use tools like Mint. It’s not important how you go about recording your spending just that you start doing it.
Another way to analyze your spending is by delaying purchases. The more you can think and analyze purchases, the more likely you are to spend money efficiently. For example I’ve spent well over a year debating whether to buy a tablet or not. Because I tend to talk myself out of purchases I have been able to save hundreds – if not thousands – by foregoing the purchase.
7) Find a Way to Increase your Income
I’m all about saving and using strategies to minimize the amount that we spend, but anyone who regularly reads Young Adult Money knows I am primarily focused on increasing income.
There are two general ways that people go about increasing their income: seek a higher-paying full-time job or start a side hustle to supplement their full-time income. I’ve personally taken both approaches as I seek out higher-paying jobs/promotions in my 9-5 as well as always try to think of new business ideas.
If you want to focus on side hustle, consider checking out our post How to Make Extra Money While Working a Full-Time Job. I talk about both increasing full-time income and pursuing a side hustle in my post Ways to Make More Money if You Already Have a Full-Time Job.
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Hopefully this post will help you think of at least one way to improve your finances in a new year. I know I always try to do at least a couple new things each year to improve my finances.
Consider checking out our three posts from the beginning of last year that are also focused on helping people improve their finances in the new year:
- 15 Ways to Improve your Finances in the New Year – Part 1
- 15 Ways to Improve your Finances in the New Year – Part 2
- 15 Ways to Improve your Finances in the New Year – Part 3
Good luck finding at least one way to improve your finances in the new year!
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What do you plan on doing to improve your finances in the new year?
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Photo by Joel Penner
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This year I am going to try my best to find ways to increase my income. I read about side hustles online all the time, but most of them seem a little out of the box for me with my work schedule. I think I found one that can do well and I am going to launch it next month.
I also think that its great that you’re breaking it down and letting people know how important it is to start saving money while your really young. This is the real key to building wealth. Thanks for the great info.
My first goal is to rebuild my emergency fun before anything else, including retirement savings and vacation. My work situation is still sketchy so I really don’t know how this year will go, but that’s priority #1. Also to reduce my grocery budget!
Increasing income is my big focus this year, or at least setting myself up to really take off the next year. I also want to pay more attention to my kids. So I have my work cut out for me.
Automating retirement contributions and tracking expenses closely are so important! Our 2015 financial plan is really to just stay the course and continue on with everything we did in 2014. No big changes needed, but we will continue to be super vigilant with our spending and focus on nudging up our incomes with raises and bonuses (and then saving those bonuses :)! Happy New Year, DC!
petrish Excited for your side hustle, petrish! I will be honest: there is no easy side hustle. It’s tough to do something in addition to your full-time job. It’s incredibly rewarding if you do find one that works.
I agree that saving and investing is key to building wealth. If you can even set aside a small amount each month it can add up over the course of 1, 2, 5, 10 years. Time goes by so quickly that you can have a decent sum of money “quick.”
Beachbudget That’s a smart goal. Having a decent emergency fund can take away (some) of the stress of an unpredictable work schedule.
Mark@BareBudgetGuy Great goal! Unfortunately paying more attention to your kids and increasing your income will probably come into conflict quite a bit. Would love to read some blogs on how you manage those priorities.
Mrs. Frugalwoods Great to hear! With your (very) early retirement goals, I think you’re smart to sock away whatever extra money you can.
#6 & #7 are our main focus right now. I’ll be bookmarking this post for future reference. Nice going, as always, DC! :)
kay ~ lifestylevoices.com #7 is one of my main focuses as well. Glad you enjoyed the post!
Welcome to the new year DC! How’d yours end up? Not sure how I can improve my finances however probably best that I focus on reducing spending, although increasing income is a big one as well!
mycareercrusade Happy New Year to you too, Jef! 2014 was a good year and I have some goals for 2014 (not necessarily increasing income – more focus on skills). I really hope to learn and grow in 2015 and focus on the skills that will allow me to increase money down the road.
DC @ Young Adult Money petrish
In my line of business (Active duty Navy Girl) I advise a lot of young Sailors about money and always encourage them to start saving while the sea salt is still fresh on their skin. For now on I’ll have to recommend your website, for you are a great example for this young men and women.
Happy New Year DC!!
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My plan is to keep on doing 6 (with the help of the <a href=”http://moneystepper.com/savingschallenge/2015-savings-challenge/”>Moneystepper Savings Challenge</a>.
7 is where I really need to focus this year!
This is a great list DC!! You know that I am a big fan of life insurance, especially if you are married and most definitely if you have kids. You just never know what could happen in life and I have seen enough horror stories to know that I don’t want me or my clients to be one of those.
moneystepper Happy New Year to you as well! Best of luck in your pursuit for increased income in 2015.
blonde_finance Thanks Shannon! Life insurance is a top priority for me in 2015.
Thanks for the helpful list. #1 reaffirms the next item on my to-do list. I just started a blog and the next post will be about confronting our credit cards, where I plan to add them all up. We have quite a bit of consumer debt, but have never totaled it up – I’m honestly a bit scared to do it. However, I understand that having a grand total should encourage us to keep working hard and watching it decrease should feel pretty good.
Harmony@CreatingMyKaleidoscope I’m glad you found the list helpful! I’ll head over and check out your blog. It can definitely be overwhelming to look up the overall debt total, but I think long-term you’ll be happy you did. I’m not going to lie, I do not keep that close of tabs on our overall student loan debt because I only plan on paying the minimum (and they are all on auto-pay). I think with your consumer debt you may benefit from a balance transfer to a 0% card (i.e. ones that give you 12-15 months of zero interest on new balance transfers) or a credit consolidation loan through Prosper or Lending Tree.
These are all excellent tips here. Getting life insurance is an absolute priority for me this year. I’m a little overwhelmed at the thought of sitting down and actually digging in to see what our best options are, but it has to be done.
Nice post, DC.
We took advantage of the HSA last year and found it to be a great resource. We were able to pay off a large portion of my son’s orthodontics with pre-tax dollars– which is just awesome
petrish DC @ Young Adult Money I really appreciate you recommending my site! Good for you for giving young sailors solid financial advice. The sooner you start practicing sound personal finance principles the better off you’ll be later on.
My big focus this year is all about number 7 – increase my income. I’m hoping to get a ‘side-hustle’ income stream established over the year, but will also be working hard to increase my salary, so I expect it to be a busy year!
TheWriteBudget Life insurance is one of my top priorities. I also am a bit in the dark of what to look for, so I plan on just using Quotacy and going with what appears to be the “best” plan.
seedebtrun That’s a great use of the HSA! It’s a big reason I think it’s smart to contribute to an HSA even if you have no medical costs. It’ll always be there down the road when you have kids.
Jason@Islands of Investing I plan on investing in myself quite a bit this year, which may not directly result in my income increasing THIS year, but hopefully it will pay off down the road. Increasing income definitely can take a lot of time and effort.