We hope that all of you had a good Christmas and you all got everything that you need/want for Christmas. During the Christmas season, everyone is filled with the holiday spirit. The holiday spirit doesn’t last long, even though we tried to have the holiday spirit throughout the year. If you are like me, you lose the holiday spirit when you see the first credit card statement after Christmas. The Christmas spirit disappears, and you start to think if your children, parents, significant other or yourself needed all the gifts you gave. Let’s start the new year right. Don’t look back at how/why you might have overspent, but look forward to reducing the debt and start saving for next Christmas. In this blog, we will go over 4 tips on how to start your financial year off right, learn from our mistakes and don’t repeat the same mistakes next year.
Open a Christmas Savings Account!
Open a new savings account and put money into the account each month or biweekly. This new account will not only help you to not repeat those mistakes but will help you to have enough money for next year’s Christmas. Start planning how much money you will need next Christmas by looking at your spending from this Christmas and add 10% for a buffer. You could go to your local credit union and set up with a designated savings account. A designated savings account has a higher interest rate than a normal savings account. With a designated savings account, you can pick the maturity date on the account. You must put in a minimum $10.00 per month and you won’t be able to take money out without penalty until your chosen maturity date. This type of savings account will keep us disciplined for next year’s Christmas. When Christmas arrives again, only spend what you saved for Christmas.
Make a Plan!
One of the best tips we can share with people is to make a plan to avoid and reduce debt. You can tell yourself that you will get out of debt next year. You might even make a New Year’s resolution. However, New Year’s resolutions shouldn’t be your plan because 80% of New Year’s resolutions fail by February. In planning to reduce debt or eliminate debt altogether is knowing how much money you can put on your debt each month. Also, we should look at how to eliminate spending on things that we don’t need. We all can do better creating a budget and in that budget, have money going to pay off debt.
Budget, Budget, and Budget!
Do you think budgeting is important? You better believe it! If you don’t have or haven’t created a budget, you should. You will be amazed where you are spending your money and how much of your income goes to necessary items. By having a budget, it keeps you accountable to your or your family’s money. I would suggest creating a budget for items in categorized buckets. These categorized buckets, for example, could be for food, insurance, gas, utilities, mortgage, entertainment, etc…Creating a budget will help you know where or how to cut your budget from other category and moved the money over to a bucket that needs more funding. There are some free sites that will help you create a budget and maintain the budget. I would recommend using Mint (https://www.mint.com/) free site to assist with your budgeting needs.
Cash is the Key!
We all have heard that cash is king. To eliminate debt and to not incur more debt, cash is the key to your success. We all have heard of Dave Ramsey. He is a good resource on ways to reduce debt and to be financially stable. We should take his advice and we would suggest putting your credit card on the shelf and only use the credit card for an emergency. When you get paid, go to the bank and take money out for each category in your budget and place the cash in each category’s envelope. Having money in envelopes will keep you disciplined, and you won’t incur debt by putting expenses on your credit card. Paying your food, utility bills, and entertainment with cash keeps you in good financial health because once you run out of money, you will need to wait until you get paid to replenish the funds to spend.
Do you think financial planning is important for next year? You bet it is! We would like to challenge everyone to let 2019 be the year of getting out of debt. We have given good tips above to help people master and achieve debt-free status. First off you need to make a plan and make a budget. When paying off debt, do the snowball method. Pay the minimum on the lower interest rate and pay all the extra money on the higher interest rate. This will help you pay the least interest and will put more money in your pockets for your budget. We hope that all of you will have a good 2019 and that 2019 will be the best year yet. Here at Flat Top Bookkeeping, we would like to wish everyone a Happy New Year.