5 Ways to Improve Your Finances in 2016

  • Feb-03-2016
  • Richard Reich

The New Year is still young, which means many of us haven’t yet given up on our resolutions. So if being better with money was on your list of things to improve on in 2016, we’ve got a few tips to help you stick to it.

1. Educate Yourself
Several studies have shown that simply being educated on the basics of saving, investing and compound interest can significantly improve your financial situation. According to one of these studies, people with a higher level of financial literacy were much more likely to save for retirement, and, on average, those who do save for retirement end up with double the wealth of those who do not. Not surprisingly, the study also found that those with insufficient financial knowledge tend to overspend, over-borrow and pay more in avoidable fees and late charges.

2. Set Goals

Whether it’s saving for a down payment on a house, finally buying that new car, or putting a certain amount of money into your retirement plan, it’s important to have a clear goal in mind. It’s much easier to plan your spending and saving when you can focus on a concrete figure.

If your goal is a big one (a down payment, paying off a big loan, etc.) it helps to break that seemingly insurmountable goal into smaller manageable steps. Set milestones throughout the year so you can check in periodically, see where you stand, and make adjustments accordingly.

It can also be helpful to share your goals with others. Tell your spouse, partner, friends, and/or share your goals and progress on social media. This will help hold you accountable as you move closer to your goals.

3. Set a Budget and Stick to It

Whether you have a financial goal or not, setting a budget is a good way to get a handle on your finances. If you aren’t exactly sure where all your money is going, or you’ve ever been surprised by your bank balance, setting a budget will help stop the bleeding and keep your money from slipping through the cracks. Setting a budget is just a matter of writing out all your expenses and comparing them to your monthly income. This will help you identify leaks (it’s very common for people to forget about automatic payments they set up in the past) and see where you can find places to cut down on extraneous spending. Then you can see what’s left over each month and decide how much to save and how much you can reasonably spend on entertainment, dining out, etc.

4. Examine Your Insurance Situation
If you’re paying for health or life insurance, you should check in periodically to see whether you’re paying too much on your monthly premiums. For instance, if you were a smoker, or avid scuba diver when you purchased your policy, but have since quit your unhealthy habit, or given up your dangerous hobby, it might be possible to renegotiate your rates after a certain amount of time has passed. Insurance companies are competitive, so it’s also possible that a different insurance company might have a better plan today that they didn’t offer a few years ago, so it’s a good idea to continue shopping around even if you already have insurance.

If you’re paying for health or life insurance, you should check in periodically to see whether you’re paying too much on your monthly premiums. For instance, if you were a smoker, or avid scuba diver when you purchased your policy, but have since quit your unhealthy habit, or given up your dangerous hobby, it might be possible to renegotiate your rates after a certain amount of time has passed.Insurance companies are competitive, so it’s also possible that a different insurance company might have a better plan today that they didn’t offer a few years ago, so it’s a good idea to continue shopping around even if you already have insurance.

5. Focus on Smaller Debts First

If you owe a few hundred dollars on a store credit card, or a thousand bucks to a collections agency for an overlooked medical bill, try to tackle those first, rather than trying to pay off everything all at once. Eliminating those tiny nagging debts will help you clean up and organize your overall financial picture so you can breathe a bit easier and begin making a dent in that massive student loan debt.

The task can seem daunting at first, but the peace of mind you get from getting a hold on your finances is more than worth it. Start setting your financial goals today, and before you know it you’ll be sitting on a nice little nest egg.

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