(originally published December 2009)
As the calendar changes to a new year, Hoosiers across the state are taking the opportunity to start fresh by resolving to change their behavior for the better. Many will use this time of year to review their financial situation and commit to improving their money management behaviors. Hoosiers are still facing the effects of the recession, so it’s no surprise that many 2010 New Year’s resolutions will focus on being smart with money.
Some financial experts are pushing consumers to spend more to help stimulate the economy. Other experts are encouraging consumers to save their money for future rainy days. So who’s right? To a certain extent, both are. Managing your money well requires a balancing act between spending now and saving for later. It’s important to commit to spending within your means while continually saving for the future and staying out of debt.
To help stay on track with your spending, first get an idea of where your money is going. We often don’t realize how much we spend, whether it’s grabbing a coffee every morning on our way to work or eating out a few times a week. Maintain a log of everything you spend money on for a week. Categorize your expenses into things you need (i.e. rent, insurance) and things you want (i.e. vacations, entertainment). If your expenses exceed your income, reevaluate where your money’s going and cut back on the items you want, but don’t necessarily need. The website http://www.mint.com/ is an excellent tool to help you track your spending and may reveal some spending patterns you should shift to strike more of a balance.
In addition to spending within your means, commit to saving a portion of your income each month. In tough economic times, it can be hard to look beyond your current financial struggles. However, it’s important to plan for tomorrow by saving today. To help stay motivated, save for a specific goal like buying your first home or paying for college tuition.
Also, consider your long-term needs like planning for retirement. Take advantage of your company’s 401(k) program or set up an Individual Retirement Account (IRA), if possible a Roth IRA, to start saving. To determine how much money you will need to retire and how much you should save each month to accumulate that amount, use the retirement calculators on http://www.indianainvestmentwatch.com/.
Here are some additional tips to help you make healthy resolutions for your finances: