WASHINGTON — Many times, a new year means new goals, new hopes and New Year's resolutions. Often times, this involves money and improving personal finances.
Here are some important pieces of advice from some personal financial gurus who know a thing or two about finding a bit more financial freedom in your life.
Be mindful of your spending
While this may seem obvious, there could be some strategies you haven't thought of when it comes to tracking your spending. The key idea is to make saving a permanent habit, so your money will continue to grow through your own personal austerity measures.
Rich Jones, who leads the financial advice brand Paychecks & Balances, explained on his blog some strategies for tracking your spending. He suggests dividing up monitoring your money into manual tracking and automatic tracking.
According to Jones, for manual tracking you could do it the old fashioned way and keep a notebook or diary with you to track each transaction you make. Or you could opt for creating a Google Sheet or an Excel spreadsheet.
If you prefer to use an app, Paychecks & Balances recommends several options including Digit, Personal Capital, Qube Money and Tiller Money.
Make a plan for your tax refund
Each year many of us dread doing our taxes. It's a chore, but it has to be done. But, if you plan for it and what you will do with any money that is returned to you, you're likely to have more control of that portion of your financial life.
On the podcast "Popcorn Finance," host Chris Browning spoke with Leigh Phillips, President & CEO of SaverLife, and suggested making a plan as soon as possible.
Whether you're planning on putting a portion of the refund straight into your savings account, or putting it toward a payment on a credit card, there are options if you plan it out and stick to your goal.
If you're having your tax refund direct deposited you can choose a "split deposit option," where you have the IRS direct deposit a portion into your checking, for example, and maybe another portion into your savings account.
You're also urged to speak to a tax professional to make sure you're not missing out on any tax benefits like the earned income tax credit. This is a bit different than a refund, as it's a credit.
Plan for a possible layoff
Your hard work saving money needs to be protected. Experiencing a layoff could really hurt your bank account and years of work.
Michelle Singletary, the columnist behind "The Color of Money," has described a layoff as "like a death" for some people, and sitting around going into a dark place of worry isn't going to help.
As Singletary described on NPR, people should plan for the possibility of a layoff and think about all sorts of actions they would do if it happened to them. She suggests creating a planning notebook on paper with different sections, like one for "investments" for example too. Singletary says to look at each of these sections and decide how much money is going to come from savings, how much money would come from a possible severance.
The plan is to have enough money to last weeks or months while you look for another job. Singletary says part of your plan should be to focus on food, shelter and utilities during this time, and that you should be in a "reserve cash mode," meaning paying debt isn't a priority during this time. So focus on making minimum payments at most to reserve cash to cover the essentials mentioned above while you look for that next job. The better you plan, and the more money you're able to save before an emergency like a layoff happens, the less you'll have to worry and struggle while looking for your next employer.
Keep your financial goals SMART
When working to become more financially free, starting with small goals that you're more likely to be able to achieve on a regular basis is best.
Rebecka Zavaleta of First Milli, a financial education website, recommends following the tenets behind the acronym "SMART." These are rules to follow, according to Zavaleta, that get you to stay with "2-3 large goals you are 80% likely to achieve" that contain each of the following:
Be specific, simple, sensible and significant with your money choices. Keep your goals measurable, as well as meaningful and motivating, says Zavaleta. Also be sure that you are picking goals which you know are actually achievable and attainable so you don't get discouraged. You want to pick goals which are relevant to your needs and life which are results-based, she says. And lastly, you want to be "time bound." Give yourself a timeline and a set of deadlines to meet your goals so that you stay focused on a task.
Zavaleta suggests telling friends and family about your goals so that you have "group accountability," and to also have self awareness through the process like finding old habits and replacing them with new ones that are going to help reach the financial goal.
Start a side hustle
To save more money, and pay off more debt, more money has to come in. One idea is to find something that can be done outside of your full-time job to make extra money.
Jannese Torres-Rodriguez, founder of Delish D'Lites, and the podcast "Yo Quiero Dinero," encourages others to take a look at ways they could work on the side to either have a back up money source if a full-time job is lost, or just a way to make extra money to put away or pay debt faster.
Torres-Rodriguez suggests looking at what you love to do and try and find out if you can make a profit from it. Also, think about investing in yourself, like upgrading your technology so that you might be able to take on more projects.
Companies like LiveOps offer contract work from home opportunities and flexible schedules, but require an up-to-date computer and a land line in most cases so it's possible before making extra money you might have to do a slight upgrade in your equipment.
Torres-Rodriguez says to think big. Keep learning new skills and embrace the fear of the unknown she says, and stay determined.
Money saving tips from Bankrate's Brian McBride
Brian McBride, a Chief Financial Analyst with the financial firm Bankrate told us that now is the time to get on your financial plan for the next year.
While it is important to prepare for the upcoming tax season as soon as possible, there's also a number of other small tasks you can hop on even during the holidays. Now is the time to educate yourself about how to improve your finances, and learn all that is available to you, to save money.
McBride recommends automating your savings, meaning pay yourself first before paying for anything else, to keep your savings higher and deposits consistent.
Instead of paying others first "flip that around, pay yourself first. Sign up for a direct deposit from your paycheck into a dedicated savings account, to save for those emergencies and unplanned expenses. By doing this first the savings happens automatically, before you have a chance to even spend the money."
With interest rates expected to go up in 2022, financial experts suggest thinking about refinancing if you own a home.
McBride says when you refinance you could even get a month where you don't pay a mortgage payment, and then have lower payments afterwards. He also encourages everyone to look around for better insurance policies.
McBride said to look at "re-shopping" your insurance policy, saying "this is your auto insurance, your life insurance, your liability insurance and homeowners insurance. And even bundling those, could be a savings opportunity. Premiums for some of those policies are on the rise."
And get on paying down those credit cards, if you can, before the new year, McBride urges.
"The writing is on the wall that interest rates are going to go up in 2022, so if you have high cost credit card debt, this is the time to get serious about paying that down," he said. "Look for zero percent and other low rate balance transfer offers. Grabbing one of those offers, not only does that insulate you from higher interest in 2022, it gives you a nice opportunity where you can get that debt knocked out, once and for all."
McBride also encourages shoppers not to forget the power of knowledge and learning about all of the credit card rewards points and perks you may have waiting to be used. Go through your credit card paperwork or even consider calling into customer service and asking questions to educate yourself and make sure you're not missing out.
Take advantage of, and learn about those "cash back credit card rewards that you’ve been accumulating, that could be a way to defray your costs by cashing those in," McBride said.
"Same thing with other loyalty points you may have accumulated," McBride says. "Or, that stash of gift cards you’ve had lying around, holiday season coming, you may accumulate even more gift cards. Those two could limit your out of pocket expenses, at a time when the cost of so many things is in the rise."