January is time for a budget checkup

January is a time to review your goals and set yourself up for success. A New Year means wiping away mistakes of the past and starting fresh. It is no secret, people make resolutions of all sorts. From losing weight to being on time to staying calm…Yet, one of the most important resolutions is getting your finances in order. A budget checkup is essential for keeping your money on track.

Thinking of getting in shape this year? Financial health is just as important as physical health. Did you know carrying around financial burdens can actually affect your well-being? According to a study done by American Psychology Association, 73% of participants cited money as being a significant cause of stress (source WebMD).

So what are you waiting for? Use my list of seven steps to help you audit your finances and fix your money mistakes of years past. If you truly want this year to be your best, do not let finances stand in the way of living your best life!

Suggested Reading: How to Set Goals and Stick With Them

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First Step in Your Budget Checkup: Create or Review Your Budget

Create a Budget

If you have a budget great! Now is the time to review it. However, if you do not have a budget, it is time to sit down and create one. Click the button below and use my budget printable to help. First, write down how much money you have coming in. Then write all of you budget categories which will include but are not limited to the following:

  • House/rent, utilities
  • transportation
  • insurance
  • childcare
  • groceries
  • clothing
  • entertainment
  • car maintenance
  • memberships


Next, subtract your total bills from your income. Hopefully, there is money left over and this can be used to save for an emergency fund, vacation fund, investing, or possibly a down payment on a house. If your bills are more than your total income, you need to cut expenses or find a side hustle.

Suggested Reading: Do You Want to Save on Your Grocery Bill? Here are 11 Amazing Ways

Make Adjustments to Your Budget Accordingly

At the end of the day, you should be bringing in more money than you are spending. Make adjustments to your budget depending on if you make more (or less) money for the upcoming year. If you got a raise congrats. Plan how you will allocate the extra money. Can you add the extra cash to your emergency fund or save for a vacation?

Take a Look at Your Debt and Make a Debt Payment Plan

Take a Look at Your Debt

Are you in debt? An astounding 8 out of 10 Americans are in debt right along with you (source CNBC.com). Credit cards are a major reason people dig themselves into debt. If you want to keep more cash in your pocket, take those tiny pieces of plastic out of your wallet.

Other debts include house loans, car loans, student loans, and/or personal loans. It will help to create a debt payment plan.  One popular method I love for paying down debt is Dave Ramsey’s “Debt Snowball.” The idea is to pay your smallest bill first to gain a sense of accomplishment.

The “Debt Snowball” method starts with paying your smallest bill and then continuing to pay the next highest debt but adding the money you paid on the first debt you paid off and so on, kind of like a rolling snowball collecting snow.

Let’s say you have two credit card balances and one is $400 and the other $2000. You would start your debt payment plan by paying the $400 debt off first, even if the interest is higher on the other balance. Yet, you will continue paying the minimums on your other debts. After you pay off the $400 card, take the money you were using for that bill and put it toward the $2000 balance until it is paid in full. Little by little you will chip away at your debt until it is gone!

Some argue you will be paying more in interest using this method; however, once you are able to get rid of some of your debt you will have a mental sense of accomplishment with each bill you pay. Nonetheless, this method has worked for thousands. If you can’t get over paying extra in interest, create a plan that you are comfortable with.

Suggested Reading: Dave Ramsey: Financial Peace is Within Your Reach

Ditch the Plastic

Opt for the cash envelope system. This is a system where you use envelopes for designated expenses. Envelope titles include the following:

  • Groceries
  • Utilities
  • Entertainment
  • Travel
  • Clothing
  • Gas
  • Date night
  • Gifts
  • Haircuts

By specifying your money to a certain fund, you will be less likely to blow waste it mindlessly because you will have to think about how much you have budgeted for a specific amount. Try it for a month. You will be amazed at how much you are able to save. Research shows it is more difficult to give up something concrete, like a $20 bill than to swipe a credit card and think about the bill later.

Another great tip is to take your credit card information out of online store’s saved information. The amount of time you have to use to get up and reach for your wallet, you may just decide that impulse buy is not worth it.

Pro Tips for Getting Out of Debt

  • Create a budget
  • Use the “Debt Snowball” Method
  • Ditch the plastic and pay cash
  • Don’t save credit card info online

Start SavingStart Saving

 

Today is your day, and this is your year to save. One way to trick yourself into saving is the 52-week savings challenge. In this challenge, you will put one $1 in a savings account your first week. After that continue adding $1 to your amount each week (second week $2, third week $3, etc.).  After a year, you will have built up $1378 for a mini-emergency fund.

Other ways to save include getting a side hustle and using that money to build up your fund. If you work hard for a year, you will at the very least have a mini-emergency fund. Continue building up your emergency fund until you have 6-9 months of your expenses. If you have an emergency or lose your job, you will be covered until you can get back on your feet again.

Suggested Reading:

  1. Ultimate List of Side Hustles: 75 Ways to Earn More Money
  2.  7 Best Survey Sites: How I Earn Extra Money
  3. Lyft: Earn Easy Money with Your Car

Invest in Yourself and Invest Now

Invest in yourself and invest now

Have you started your retirement fund? Use this financial checkup to start looking at your future. If you are young, you are in an awesome place to save. Even if you just graduated from college and are starting your first “real job”. Start putting something away toward a retirement fund.

Yet, if you are lucky, you will have a plan through your employer. Check with your human resources department to find out if they match contributions. Nonetheless, many companies are not offering fringe benefits anymore and you may have to go out on your own.

The great news is you have free options because you can sign up online. Fidelity is a good choice if you are looking to invest or sign up for a Roth IRA. Trust me, you do not want to be forced to work until you qualify for Social Security one day. Use your youth as an advantage. Put your money in some trusted mutual funds and ride the wave of the stock market. You will have time to recover if there is a huge dip.

If you are older, it is never too late to start. It is always suggested by financial planners to invest in riskier stocks when you are younger and start moving money to safer options as you age so you are not affected by the stock market’s highs and lows. Safe options include money-market accounts, mutual funds with a trusted track record, bonds, and annuities.

Note: I am not a financial planner but these are methods I have personally used to invest in my retirement and my husband and I have done well with our investments. If you feel unsure about investing you can always consult a financial planner and go from there! Do not be afraid to invest! Especially if you are young. You will have time to learn from your mistakes and get on track.

Plan Your Taxes

Start planning your taxes in January. Take some time to collect all of your receipts and forms and organize them into folders. If you are really organized you can start doing this at the beginning of the year, for next year’s taxes. Keep invoices, bank statements, and receipts. This will make doing your taxes a breeze. About 30% of people itemize; however after the new tax law passed it may make more sense to take the standard deduction because the new tax law cuts the number of eligible deductions (Source H&Rblock.com).

If you have no clue what I am talking about above, no worries. Talk to a CPA and make sure you are maximizing your credits and deductions. This means more money in your pocket at the end of the day.

Also, if you typically receive a large refund, consider changing your W-4 form at work to put more money back in your pocket. Basically, you are giving the government an interest-free loan when you overpay your taxes. Some people like getting a big check back; however, with some careful planning, you could put that extra money in a separate fund on payday and not look at it until April/May (well, maybe just a peek here and there to make sure your money is safe!) Surprise! You just earned interest on your money!

Check Your Credit Score

This is one thing most people do not do often enough (including myself!). In lite of the Equifax breach, people are trusting credit bureaus less. However, checking your credit will only benefit you in the long run. For one, you will know your credit score and if it is on the low side (below 600) you can take steps to improve your score by paying bills on time and paying off debt.

Furthermore, at times there are mistakes on your credit report. You may have been charged a bill that you did not know about and your name has been put into collections even if the bill was not yours. Also, maybe there was credit card opened in your name, but it was not by you. This can only be disputed if you know about it. So make a goal to check your credit score once a year. This is on my list!

Do a yearly budget audit

Do You Have Enough Insurance for the Upcoming Year?

Hands down, insurance is important. The New Year is a great time to check your coverage. Your deductible most likely will start over on January 1st, so be prepared to pay the deductible if you need to go to the doctor.

Call your insurance and ask for a coverage pamphlet, so you know exactly what you will pay. I made an insurance mistake this year and my husband and I were stuck with a $500 unexpected bill. I should have had them run my doctors visit through my insurance and I advise you to do the same when scheduling appointments.

Many plans offer coverage for check-ups, but you end up paying the out-of-pocket deductible if you have an illness or an accident (my son broke his arm last year and we had to pay $200 out-of-pocket because we had not met our family deductible.) You get the point! It is WAY better to be in the know about your insurance. The key is to educate yourself as much as possible so you do not have a surprise bill. Luckily, my husband and I have an emergency fund so the bill did not hit us as hard as it could have.

Make adjustments as needed. Now is also a good time to shop around.

Questions to ask Yourself/Insurance about Coverage:

  1. Can you find better coverage for less money?
  2. Does your employer offer insurance or would it be cheaper to pay for insurance out-of-pocket? Some employers offer a credit if you opt out of the company insurance.

Credit Check Up Conclusion

In conclusion, a  money checkup is just as important as all of those Resolutions you set each year. If your resolutions were financial, use the suggestions above and be prepared for the New Year! Review your budget and create a plan to pay off debt. Also, start saving and set aside a separate fund for emergencies. Using a separate fund will lower the chances of taking the money out for an impulse buy. Start setting aside money for retirement because you are never too young and if you are young, time is on your side!

Plan for your taxes and organize all of your papers. Don’t forget to check your credit score and dispute any mistakes. Also very important, review your insurance and plan doctor’s visits according. Check your insurance and have your doctor’s office or hospital run any special visits or test through your insurance so you do not end up with a surprise like I did. The seven steps above will help you have a healthy, happy, financially fit New Year!

Please leave me a comment if you have any questions! What is your favorite way to plan your finances at the beginning of each year? Do you have any special methods that are not mentioned above? I would love to hear from you!

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Take care – Sarah

5 comments on “How to Do a Financial Checkup This Year”

  1. The tip of not saving you credit card info online is so helpful, last week I spent 5$ on a game on my phone because I had them and my paypal was connected, I was so into the game I didn’t even realise… Then once I got the bill I realised how stupid I was, I know it’s only 5$ but that said a lot to me, so remuving them rn

  2. oooh goodness! My finances are A HOT MESS since I graduated, my student loans came out of deferment, and we moved to Denver (crazy CRAZY expensive cost of living compared to FL) But this year one of my goals is to get my finances back in order! It was definitely less stressful when I budgeted better. Good tips!

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