Here are the first three steps you can take to start the New Year off right with your money.
1. Make a Goal
Why? When you start saying, “no,” to the things you love, there needs to be something that makes you say, “yes.”
- No to Olive Garden; Yes to retirement
- No to binge drinking; Yes to vacation
- No to a new car payment; Yes to paying off student loans
Explanation Too many families start on a budget just because we think it’s the right thing to do (see step 2). We scrimp, save, cut coupons, and cause all this pain. But for what? Many families don’t have an answer, and that’s usually the first mistake.
Next Step Pick one goal for your money, and after three months of budgeting, you can add more.
2. Start Budgeting
Why? When you make a plan, it’s easier to find and correct your mistakes.
- Picking a play for the huddle.
- Practicing a piece of music.
- Using grandma’s sugar cookie recipe.
Explanation Ok, I know that the b-word makes a lot of you cringe, but having a budget is absolutely necessary. Now, what I mean by budgeting is not (1) writing down all your bills on a piece of paper and (2) making sure they’re paid.
Budgeting is a plan for your money before the month begins. If your family makes $3000 in February, then before February starts, decide where you want all of that $3000 to go. Bills, debt, retirement, vacation, movies, or having fun.
Next Step Create a zero-balanced budget for next month.
3. Start an Emergency Fund
Why? Avoid the cycle of charging emergencies to a credit card.
- The car gets a flat tire.
- The air conditioner breaks.
- You need a new prescription.
Explanation In addition to your major goal (retirement, getting out of debt, vacation, etc.), be sure to get $1000 sitting somewhere as your emergency fund. What is an emergency fund? It’s your stash of cash to pay for small, unexpected things. We get stuck in the credit card debt cycle because when these emergencies come up, we have no choice but to put it on a credit card.
Next Step Put “emergency fund” as one of your items in the budget and get to $1000 as fast as you can.