It’s tax season again, and there is no better time than the present to invigorate new financial goals. Whether you want to save up for a backpacking trip to Europe, or if you’re looking for a fresh start from debt, here is how you can create a budget so you can achieve your financial goals.
List Your Goals
Before you save, you need to clarify to yourself for what you are saving. What is it you really want, and why do you want it? Perhaps you want to save for a home to raise a family, a new car, or a big vacation. On the other hand, maybe you have debt to pay off and you need to do so before you make any major purchases. When you reflect on what you want and why you want it, you may be able to cut out the fat and find a singular goal of what you want for your future.
List Your Debts (if You Have Any)
If you do have outstanding debt, it is essential that you write them all down in a tangible list. Many people get intimidated when they face their debt, but when you write them down in a list, they suddenly feel tangible and achievable. For example, you may want to list your debt from highest to lowest dollar amount. Some people choose to tackle their highest debt first because it is motivating to watch such a high number diminish over time. On the flip side, some people list their debt according to the interest rate, paying off accounts that charge the highest interest first. If not properly monitored, the interest can raise the dollar amount to much more than the original price. When deciding between the two methods, you will have to consider the amount you owe with each debt to decipher which path is best for you.
Cut Unnecessary Spending
You may feel like you are getting a steal on Thursday’s happy hour with drinks and sushi, but those costs add up. Perhaps you can’t help but splurge on brunch or designer coffee beans. Whatever your weakness may be, it is important to weigh your needs versus your wants. You may easily be seduced by a nice dress or a pricey wine, but are these the things you need in order to live? If you want to reap your rewards in the future, then this is the time to cut back. One simple way you can do this is to plan out your grocery list. Instead of spontaneously running to the grocery store on an empty stomach, plan a list ahead of time that you can use to get your ingredients. Plan to make a meal that lasts throughout the week. This cuts down on spending and prep time when you need to run to work. Also, try using coupons. The Coupons App on your smart device will alert you to deals in your area so that you can get cost effective options.
Be Savvy With Your Credit Cards
Credit can be a huge asset if you know how to use it. Unless you already have a large burden of credit debt, it is a good idea to open a line of credit so that you can build your score. If you want to travel the globe, consider a Chase Sapphire Card that will help you earn points toward travel, such as plane tickets. If you are able, try to get cards with lower interest rates as well. Spend wisely by only using your card for necessities that you know you can pay off. Set a budget for your credit spending—use it for expenditures such as gas, a loan payment, or any other necessity that you know will cost a certain amount each month. It is also useful to use a credit card in case of an emergency.
Work an Additional Job
If you have a reward in mind, you may want to work an extra job temporarily. By babysitting, dogsitting, or serving, you can save a bundle of money to spend how you please as if it were an allowance that’s separate from your income.
In the short term, cutting back to save money doesn’t sound exciting. However, in the long run you can reap huge rewards. Follow some of these tips and you will find yourself on that flight to Bali in no time.