The start of a new year represents a welcome break from the flurry of holiday spending. Once the hustle and bustle die down, you hopefully aren’t expected to make big purchases in the following months.
Take advantage of this quiet financial moment to reflect on your past spending and look toward the future. Check out this guide to help you perform this critical budget tune-up today.
Review Your Financial Statements
Start by taking stock of your holiday spending. What’s the damage? Review your credit card and bank statements to get a good grasp on just how much you spent. This exercise isn’t designed to stress you out — it’s accountability.
Moving beyond December is a good idea, too. Assess your current budget to reflect the reality of today. Add all income sources, including any holiday bonuses, raises, and gifts you may have received. On the expenses side, factor in your credit card debt on top of regular monthly bills.
Address Debt and Savings First
Between taking on debt and emptying your savings, the holidays can take a sledgehammer to your financial preparedness. Like many people, you rely on your credit cards and emergency fund in emergency situations, like when you need to replace your car’s brakes ahead of schedule.
You want to revive these safety nets as soon as possible because you never know when an emergency might strike. It can even happen at the start of a brand-new year when you aren’t prepared.
Luckily, you have other ways to handle the unexpected when you don’t have these typical safety nets at your disposal. You can explore the world of online personal lines of credit to see if you qualify.
Start by visiting a site like Fora, a lending platform that simplifies the borrowing experience. A Fora Credit line of credit can help you compare options by setting an example. Borrowers have the flexibility to choose how much they draw against their approved limit, using as little or as much as their emergency demands.
This spending comes with no additional fees. Instead, you just pay the interest on the amount you draw. Keep this in mind as you compare your options to calculate the cost of borrowing.
Reduce Your Spending
The quickest way to pay back savings and pay off debt is by reducing your spending in the new year.
Go through the previous year’s statements to get a good grasp of your spending style. You’ll want to organize your spending into categories and understand what you spend on housing costs, utilities, food, insurance, etc.
So far, these expenses fall under essential spending — things you need to run your household or live your life safely. But every budget contains discretionary spending, too. While organizing your needs, you should flag unnecessary, fun, or miscellaneous expenses.
Once you have a list of flagged spending, you can go through these expenses, choosing what stays and what goes. You don’t have to eliminate all fun spending in a month, but you should curb any spending that gets in the way of paying off debt or rebuilding your savings.
Take a balanced approach to this step. Instead of swearing off all takeout for the rest of the year, consider it a once-a-month treat. Rather than keeping all 14 streaming and tech subscriptions — many of them you don’t remember you have — cancel all but your top three.
The start of a new year is the perfect time to check in with your budget to see what you need to change for a better financial year. Making these changes now can set the entire financial tone of 2024 and beyond!
Published on Holr Magazine