I really hate the idea of New Years Resolutions. If you’re going to eat healthy, start budgeting, or whatever, start doing it now!
This post is nothing like that….kinda.
I’m going to talk about things that need to be done before January in preparation of the new year. I like to spend the last month of the year looking back over the last 11 months to ask myself what I can do better. I look at things like spending, family time, work, and even my health. I guess where my line of thinking differs from the typical new years resolutions is that I start acting on it right away. Personally, I feel that delaying the start of change only increases your chances of not following through.
Having said that, the holiday season is the perfect time to start setting up things like sinking funds, tax withholding and health / dental insurance plans. So without further delay, let’s dig in to my 5 money smart tasks to prepare for the new year!
Start a Budget
If you haven’t started using a written budget, start now. There is just no reason to wait on this. It doesn’t matter if you have $2 or $2,000, YOU CAN SETUP A BUDGET. I will guarantee you that if you start living on a written budget starting now, that you will see a dramatic decrease in the amount of money you spend in 2015.
Remember, living on a budget doesn’t mean your broke or being “restricted”. The only thing restricting you is the money in your bank account. What you’re doing is taking control of your spending. You’re telling your money where to go rather than wondering where it went. If you need help, look back at the earlier posts in the #MoneySmartMedics series or send me an e-mail. I’ll be glad to help in any way I can!
Adjust Your Tax Withholding
I’ve said it before, and I’ll say it again: Tax returns are not a good thing. If you’re getting thousands of dollars back on your taxes, then you need to seriously adjust what’s taken out of your check every month. That is money that could be used to pay off debt, build a retirement fund or even pay for college. Don’t let the government hold on to your money interest-free!
I hear a lot of people say that they enjoy tax returns because it’s “forced savings”. Well, it’s not savings if you spend it once you get it. If you don’t think you can handle the extra money every month responsibly, then go talk to your payroll department and have it deposited into a savings or a ROTH IRA.
Setup Your Sinking Funds
If you’re not familiar with sinking funds, go check this out and head on back. A sinking fund is really just a fancy version of your Christmas cookie jar. It’s a fund that you contribute to every pay period to achieve a short or long-term savings goal. For example: CHRISTMAS! Do you know when I start saving for Christmas? The moment I buy my last Christmas present!
OK, I know most everyone reading this didn’t go back and read the article on sinking funds, and don’t worry, I’m not judging, I’m the same way. So with that in mind, here’s the short version:
To setup your sinking funds, you need to identify the major expenses that you know you will run into throughout the year. Now, take those expenses, divide them by the amount of pay periods for the year and BOOM! Now you know how much to set aside every pay check.
Get on a Plan to Pay off Debt
Most of us keep loans around long enough that we think they’re a member of our family. It’s time to change that. Make a commitment to stop borrowing money, whether it be on credit cards, cars or student loans. Line up your debts smallest to largest, and start paying them off in that order. Debt is one of the biggest things holding us back from doing what we really want to do with our lives, so let’s kick it to the curb!
Plan for Health and Dental Expenses
OK, so I failed miserably at this one last year. I didn’t plan for anything and wound up blowing my emergency fund over dental work. Don’t be like me. Here’s a couple things that you can do to prepare for upcoming expenses:
- Setup Flex Spending
If you’re not familiar with flex spending, then talk to your payroll or human resources department. It’s an account that you setup that’s pre-loaded with up to $2,500 that can be used for anything health or dental related. This includes co-pays, prescriptions, etc. You decide the amount that you want to have and payroll will deduct the amount over the course of the year pre-tax from your paycheck. By having it taken out pre-tax, you are essentially saving 30% on those expenses! The only downfall here, is that any unused funds are non-refundable at the end of the year, so make sure you only budget what you will need!
- See If You Quality for a Healthcare Savings Account (HSA)
This is very similar to a flex-spending account in that the money is contributed pre-tax. Where it differs is that the money isn’t “pre-loaded” which means that you will actually have to build up a decent balance before it becomes useful. Having said that, it could be a great option to handle expenses coming up at the end of the year while you use money from your FSA at the beginning. Also, the money belongs to you, so you don’t lose it at the end of the year!
January isn’t the time to figure this stuff out. Get on the ball today. Maybe you don’t have money to put away at this very second, but you can find 10 minutes and a piece of paper to write on. Come up with a plan and execute!
On a side note, I want to take a moment to thank everyone that has been following these posts. I have received some amazing feedback and I’m truly blessed to have such an awesome readership. I have some really exciting things coming up in 2015 and I seriously can’t wait to share everything with you guys. Thanks again and keep kicking ass!