It’s easy for us to focus on huge resolutions because they feel so impactful and empowering. Promises of losing 20 pounds or saving $10,000 feel good to say even if they may be a little unreasonable. Sadly, most of those are abandoned before the flowers have begun to bloom.
But what if I told you there were a handful of things you can do right now that can set you up financially all year? They don’t take big promises or big changes in your life, but they have the potential to make a big difference.
The first three months of the year are crucial, and you can use this time to put processes in place to make the rest of the year that much easier. Here are five ways to get started right now.
1. Start Budgeting
Famed management expert Peter Drucker once said, “If you can’t measure it, you can’t manage it.” The quote itself has many variations, but the point is straightforward. If you don’t measure something, you can’t manage it. And if you can’t manage it, you can’t improve it.
If you want to understand your finances, you need to measure them, and that means having a budget. The first step is to track your finances, and there is a plethora of tracking tools out there for you to choose from.
Once you’ve started tracking your expenses, you can start being more proactive about where you spend your money. If you find yourself spending too much in one area, you’ll know and can adjust for it next month. For a particularly large adjustment, take advantage of a transition budget to help make that change over time so it’s more likely to last.
2. Increase Your Retirement Contributions
For many, myself included, retirement can feel like a lifetime away … but it’s not. One way you can help yourself prepare for retirement is to save just a little bit more than you are already. A little bit more can have a big effect.
Try to increase your retirement contribution by 10%, so that if you’re saving $100 a pay period, try increasing it to $110. By saving an extra $10 a month over 40 years, you’ll make $4,800 more in contributions. Imagine what could happen if you increased it even more!
3. Pay Yourself First
Do you still want nearly all the benefits of budgeting without all the work? Pay yourself first. That’s where you save a percentage of your paycheck first, then spend the rest. By transferring out your savings immediately from your checking account, perhaps into a retirement account or a separate savings account, you prevent yourself from spending it in the first place.
When you save first, you get nearly all the benefits of budgeting without the pesky accounting homework.
4. Close Old Accounts
I love getting mail — unless it’s tax-related mail. This time of year, my mailbox is full of tax forms and other filing documents. Few things are as irritating as a 1099-INT reporting interest for an account I rarely use.
Do yourself a favor and start closing and consolidating all those accounts you no longer use. This will simplify your finances and also reduce the amount of mental clutter involved with managing your money. Most accounts are very simple to close and take just a phone call.
The only exception to this would be your credit cards. Closing an account can have a negative effect on your credit score, so for now it may be best to leave those alone.
5. Check Your Credit Reports
The Fair Credit Reporting Act gives you the right to check your credit report once a year at each of the three credit bureaus — Experian, Equifax and TransUnion. You can visit Annualcreditreport.com to get a free copy of one of your reports once a year or you can view two of your free credit scores, with updates every two weeks, on Credit.com.
It’s best to do this now so you can fix any errors immediately. If you plan on doing anything that involves borrowing credit, from buying a house or a car to signing up for cell service or renting an apartment, you’ll want your credit report to be accurate. Fixing errors can take time, so you don’t want to be doing this when you’re, say, two weeks away from buying a house.
By making the five moves outlined above, you can set yourself for a much easier financial year.