Taking control of your financial situation can be very rewarding, though “taking control” can mean different things to different people. For some, it means using a budget for the first time or living within certain parameters when it comes to spending. For others, it might mean sitting down with a financial advisor and creating a comprehensive plan for their retirement goals and dreams.
Regardless, nearly any step we take in the right direction is a good thing, even if we only take baby steps at first. And with the new year upon us, it might be time to take a few more steps toward a better future. But where to start?
Small Moves Can Mean Big Changes
The good news is you don’t have to completely transform your financial situation in order to make meaningful change. There are plenty of small moves you can make that can snowball into bigger changes over time — and all for your benefit.
The one thing to remember is that you are the only one with the power to fix your financial situation and make better choices in the future. Here are 15 ways you can improve your financial situation in 2015 and beyond:
Start Using a Budget
Hate the “B” word? If so, you’re not alone. A recent Gallup poll showed that only one in three Americans prepared a detailed budget to track their spending and savings rates in 2013. But don’t let that discourage you.
Instead of seeing the “B” word as a potential restriction on your personal freedoms, try to see it as a necessary step if you want to get the most out of your money. I wrote about how you can create and use a zero-sum budget, but there are dozens of other ways to keep track of your spending and monthly bills besides that strategy.
For most, the key is simply getting started. Once you begin tracking your spending and living with a budget you’ve created, you’ll likely come up with a system that works best with your lifestyle.
Slash Your Spending
If your spending is higher than it should be, the end of the year is the perfect time to figure out why. Start by digging out your bank statements from the last few months and taking note of any categories where spending was high.
Figure out how much you spent in areas where you tend to splurge (groceries, entertainment, and transportation seem to be problem areas for many people) and ask yourself what you can do to rein things in during the new year. Keep in mind that slashing your spending might work best if you are using a budget to keep yourself accountable.
Pay Yourself First
Slashing your spending and using a budget can improve your financial situation almost immediately. But you also need to make a plan for the extra money that will inevitably start piling up. What will you do with it? Most financial experts suggest that you “pay yourself first,” either by transferring a certain sum to a savings account on payday or by bumping up your retirement contributions. You could do both. Just be sure to make it automatic.
Dump Debt for Good
If you’re in debt and struggling, 2015 might be the year to create a comprehensive plan to get out of debt and stay out. Start by making a list of every debt you owe and prioritizing them either by the size of the balance or the highest interest rate.
If you’ve started using a budget and slashed your spending already, you should have a monthly surplus of cash that you can throw toward your highest-priority balance. Using the “debt snowball” method, snowball each payment toward the next highest-priority debt until nothing is left. Becoming debt-free in 2015 might be possible, but only if you create an actionable plan to get there and actually start doing it.
Get Right With Retirement
If you’ve been socking money away in your work-sponsored retirement account, you’re ahead of the game. But are you actually on track to retire on time?
There’s only one way to find out. If you want to get right with retirement, start by taking the steps to reach your preferred retirement “number.” Plug your data into any one of a handful of retirement calculators to see how close you will come to your goal if you continue saving at your current rate.
If you use the services of a financial planner, discuss any changes you could make that could benefit your financial situation. Also consider using the retirement tools offered by Personal Capital to figure out where you’re headed and track all your investments in one place.
Contribute Beyond the Company Match
According to experts, failing to contribute enough to your retirement account to get the full company match could mean tens of thousands of dollars in lost earnings over a lifetime. And since that money is essentially free, it’s wasteful to ignore it.
If you want to take full advantage of your employer’s 401(k), make sure you’re contributing enough to receive the full company match on your contributions, which is usually anywhere from 3% to 6%.
Even better, contribute as much to your tax-deferred 401(k) plan as you can comfortably handle. The IRS recently upped contribution limits for 2015, making it possible for workers to contribute up to $18,000 to their 401(k) plans starting this year.
Open a Health Savings Account
Families who have a high-deductible health insurance plan, or HDHP, can save money on taxes and save for future health expenses in a tax-advantaged health savings account, or HSA. To qualify, your HDHP must have an individual deductible higher than $1,300 or family deductible higher than $2,600 for 2015.
Annual out-of-pocket expenses (deductibles, copayments, and other amounts, but not premiums) cannot exceed $6,450 for self-only coverage and $12,900 for family coverage. Individuals can contribute up to $3,350 per year and families can sock away up to $6,650. Meanwhile, HSA holders 55 and older can contribute an additional $1,000 per year to either type of account.
Shop Around for Health Insurance Coverage
With all the changes in health care over the past few years, many say it is harder than ever to find the best health insurance companies and programs in your area. Fortunately, thanks to the passage of the Patient Protection and Affordable Care Act, families making up to 400% of the federal poverty limit may receive subsidies that can make health care more affordable on certain plans bought through a state or federal health insurance exchange.
We are in an open enrollment period, and you have until Feb. 15 to select a plan for the new year. If you’ve been healthy, consider trading up to a high-deductible plan with a lower monthly payment and higher deductible and stashing your savings in a tax-advantaged health savings account.
On the other hand, if you aren’t finding any affordable options in your area, consider joining a health care sharing ministry such as Christian Medi-Share or Liberty HealthShare. This will exempt you from having to pay the penalty for not having health insurance in 2015 and provide your family with meaningful catastrophic coverage in the process.
Start Planning for College
If you have young children, you’ve probably wondered whether you will be able to help them pay for college. Fortunately, time may still be on your side, but only if you get started now.
Start by researching different types of accounts that may be advantageous for college money, including 529 plans or tuition prepayment plans. Also make sure to explore any tax benefits your state offers on contributing to college savings accounts. For example, Indiana, where I live, offers a 20% tax credit on the first $5,000 we contribute to a 529 plan in any given year. Your state might offer a different or better benefit.
Build an Emergency Fund
Most experts recommend you have three to six months of expenses stashed away in case emergency strikes. If it hasn’t yet, rest assured that it will. After all, roofs need to be replaced, cars break down, and people lose jobs all the time, often when they least expect it.
To protect yourself, you need an emergency fund that is adequate to take care of any potential hardships. To get started, save as much as you can every payday or once per month and transfer those funds in a designated high-interest savings account. Let your fund continue to grow until it reaches its potential. Then leave it alone until you really need it.
Start a Fun Fund
Having money for emergencies is great, but what about that vacation you’ve always wanted to take? In addition to building an adequate emergency fund, you should also start a fun fund and use it for the things you really want in life.
Whether it’s the ability to travel or to visit family, money for a kitchen remodel, or savings for a sudden splurge, we all deserve to have some “fun money” to spend. So once you get your emergency fund up and running, start saving for your goals, too. Your future self will thank you.
Make Sure You’re Insured
Your insurance needs will likely change several times throughout your life, and can fluctuate depending on your circumstances. It’s always wise to see if you’re properly insured in every aspect of your life.
For example, when was the last time you considered your life insurance needs? Do you have enough assets that you should be considering an umbrella policy? Check your policies — car, home, etc. — and make sure your coverage is still in line with your goals. If not, look for a new policy that does, or simply make changes to your existing policies.
Shop Around for Everything
When it comes to your monthly bills, it’s important to look for better pricing and plans on every negotiable bill. Some examples can include your cellphone plan, household Internet and data plan, cable or satellite television package, and even your auto and homeowners insurance. Shop around to find the best deals, compare plans, and don’t be afraid to switch providers to get a better deal.
Get Your Free Annual Credit Report
With identity theft and cybercrimes on the rise, it makes sense to check your credit report for errors and fraudulent activity from time to time. Fortunately, the Fair Credit Reporting Act ensures that each U.S. resident can obtain a free copy of their credit report every year.
AnnualCreditReport.com is the only website authorized to offer this service, and you’ll get a report from each of the three major nationwide credit-reporting companies simply for visiting the site and providing the required information. You can also track your credit throughout the year on sites like CreditKarma and CreditSesame. Both will send you updates on your credit score as well as an email any time an account is opened in your name.
Start a Side Hustle
Getting ahead with just the income from your full-time job can be a struggle, but no one says you can’t start hustling on the side. If you have any sort of skill or side hustle at all, you should be able to come up with at least one way to bring in some extra cash, right?
Popular side hustles can include selling crafts and homemade goods on Etsy, mowing lawns, driving for Uber, cleaning houses, hosting house guests, and even babysitting. If you have a special talent or skill, that’s even better. Put your skills to work and create a side business that pushes you closer to your goals.
No matter where you are in your financial journey, we all have room for improvement. If you want 2015 to be the best year yet, create a list of goals you hope to accomplish and ask yourself what it will take to get there.
And remember, financial wins are rarely achieved due to luck alone. You need a plan, and you need to take the actionable steps that can make that plan become reality.
What financial wins are you planning for in 2015? What are your 2015 resolutions when it comes to money?