It’s that time again. With all of the newness that the New Year brings, there is no better time than the present to look at your financial life and take some solid steps towards a better financial future.
Here are several principles and ideas to get you started.
Change one or two small habits to make a huge long term impact.
Start brewing your coffee at home, instead of getting that 20-oz designer coffee, for example. Pack your lunch. Take the savings and put it towards your retirement account. Even if you save just $20 per week, if you compound that at a 7% investment return, you could have more than $45,000 in 20 years. If you have 30 years to invest, you could end up with over $106,000!
Focus on paying off your debt obligation to yield bigger results.
Conventional wisdom says to pay of the highest interest debt first. That is certainly good advice and often makes the most sense. However, if you have several IOUs and the interest rates are not hugely different, sometimes it can make a lot of sense to pay off the one with the smallest balance first. Why? For one thing, it gives you a psychological boost. And for another, once you no longer have your monthly cash flow going towards that particular debt, you can turn around and sock it away towards payments on your larger debts or to achieve your long-term investment goals.
Reviewing and streamlining your information services might net you some easy money.
While it may be hard to change your car loan and expensive to refinance your mortgage, there are more attainable ways to hack away at your monthly payments. Your phone, internet, and other such services may add up to the cost of a car payment, but present a more attainable means of lowering your monthly costs by streamlining. Consider ditching satellite or cable for Internet TV. Get rid of your landline. Consolidate providers. You could easily save $50 to $100 per month, and maybe even more. Put that extra cash towards paying down debt or long-term investing.
Cutting expenses is like giving yourself a pay raise. If you can cut just $100 per month, keep in mind that this is money that has already been taxed. If the taxes on your paycheck ordinarily add up to about 25%, that’s like giving yourself a pay raise of $1,600 per year! Use this mindset to inspire you to look for other ways to cut costs.