Smart Financial Decision to Start The New Year

A new year is a great time to start over. Many people resolve to exercise more, lose weight or take some other action to live better. One resolution that can have a long-term positive impact is to save more money. You can save the extra funds for an emergency, or invest for retirement. Use these tips to save more money and have peace of mind.


Review all of your spending

To start the process, find out where you are financially by reviewing all of your spending. Use your bank and credit card statements for the past 3 months. Create a category for each type of spending. You’ll have categories for car payments, utilities and entertainment, for example.

There are several ways to document your spending. You can create an excel document, or simply write down the totals on paper. List your spending categories in the left margin and write down your monthly spending next to each category. The goal is to have a complete listing of all of your spending for 3 months.

Create a budget

Once you’ve documented all of your spending, start looking for areas where you can cut expenses. Some payments in your budget are fixed. Your home mortgage and car payment, for example, are the same amount each month. Focus on other areas that can be changed.

Utility costs

At first glance, you may think that your utility costs are fixed. If you dig deeper, you can find ways to cut these expenses. Take a close look at the costs you pay for entertainment.

Many people with cable TV pay extra fees for premium movie channels. You may also buy pay per view movies through your cable provider. Direct TV in Texas points out that you can get hundreds of HD channels and Internet access for one fee. You may be able to pay significantly less for more home entertainment.

You can reduce your energy costs by using less hot water. Start washing your clothes in cold water whenever possible. Set your thermostat so that your house stays slightly warmer in the summer and cooler in the winter.

Meals and other entertainment

Look at your spending for dinners, movies and other entertainment outside the home. Also take a look at any daily spending habits you have. If you buy coffee or food each morning, add up those monthly costs.

You may find that these expenses are the most obvious items to cut. Rather than seeing three movies a month, you can cut back to one. Instead of buying expensive coffee each morning, make coffee at home a few mornings a week. These are expenses you can easily change.

Eliminating some costs

If you make some tough decisions, you may be able to eliminate some expenses completely. You might decide to only see movies at home for a month. You could cook at home and not dine out for a period of time. Instead of paying for forms of entertainment, look for free options. Many museums, festivals and other events are free to the public.

As you think about cutting expenses, remember that there is a payoff. You’re making the changes to save money. The extra money will give you some peace of mind and help you in an emergency. If you remember your ultimate goal, cutting expenses will be easier for you.