Everybody makes New Year’s resolutions: lose weight, gain muscle, write books, read books, get a degree, get a raise, and so on infinitum. All of that is great, but I want to give you a completely different starting point for 2016: get your finances in order. Do you realize how much of your life will change when you start emerging out from under that pile of bills, credit card balances, and STRESS?
As I start a new year, here are the three primary focuses I renew:
1. Did I bring in more than I spent?
- I know that sounds so basic, but if your expenses are even one penny over your income you are starting down. If you repeat that in 2016, you will end up in a further hole than you are in.
- Turn that one factor around (cutting expenses to below your income) and everything will change for you this year. It’s going to take “guts to come out of the ruts” but two hours worth of soul searching will help you come up with a plan to throw over the ballast so the balloon can begin to rise.
- FIRST STEP: If you can’t budget, get some envelopes and write a title on each one (gas, food, utilities, etc.). Put the amount you budget in cash in each envelope. ONLY PAY OUT OF THAT ENVELOPE. When the envelope is empty, stop spending the rest of the month in that category!
2. Is there a debt anywhere I can pay off and be done with?
- Start with your LOWEST balance on a debt and your HIGHEST interest rate. Put ANY cash you accumulate (no Starbucks for a month, etc.) toward paying that one bill off. You will be amazed how energized you become toward becoming debt free when you conquer your first debt!
- Now, put the money you are saving on the monthly payment for the FIRST debt toward a SECOND debt. The snowball has begun!! In 2016, you will be amazed at how quickly five or six PAID OFF bills will chase down the rest of what you owe.
- FIRST STEP: Run, don’t walk to enroll in Financial Peace University (Dave Ramsey). The cost of the tuition will be swallowed up quickly as you implement the debt elimination strategy.
3. Do I have my emergency fund in place?
- A dear friend of mine in the ministry taught me to live off the “top of the barrel” and not scraping the “bottom of the barrel.” He said if I would fill my barrel once in my lifetime I would never need to do it again.
- FIRST STEP: Dave Ramsey teaches that you need 90 DAYS OF INCOME sitting in a bank account. Impossible, you say? What about that old boat behind the garage? What about an automatic savings deduction of 10% from your check before you can even see it? It may take you two years to do this (like me) but your financial stress will by and large be over.
There is so much more you can do but start with these three: spending restraint, debt reduction, and cash savings. NOW, your 2016 is looking a lot better!