Retailers have already released their Black Friday ads kicking preparations for the holidays into high gear well ahead of Thanksgiving. Amidst all the hustle and bustle of this season, it’s not too early to start thinking about 2018.
Whether you have a good handle on your finances and want to solidify the solid foundation you’ve built or you’re wanting to make some changes in 2018 to improve your financial health, the following habits are good ones to adopt in 2018.
#1. Make Savings Automatic
You’ve probably heard that you should pay yourself first. This bit of advice is designed to help you build up a savings account by making the funding of one so important that it should be paid first. How many times have you had good intentions to do just that but found that yourself paying your mortgage, utilities, car payment and other expenses with nothing left over for your savings account?
Making savings automatic is an easy way to make sure that the money is taken out of your bank account or check before you have a chance to spend it on bills. You can either set up an automatic transfer through your bank that deposits a set amount from your checking account into your savings account on a biweekly basis or you can tap into your employer’s mechanism to do so automatically.
#2. Compartmentalize Your Savings
Setting up — and funding — a savings account is only the first step of making 2018 the year you increase your financial health.
Instead of simply funneling all of your savings into one master account, open several different ones that are earmarked for specific goals. Of course, you should have a savings account devoted solely to building up an emergency fund with at least six to nine months of living expenses.
Other big purchases — a wedding, the down payment on a house, that top-of-the-line mountain bike, your European vacation — also need their own separate savings accounts. Adopting this strategy allows you to easily see how much progress you’re making toward attaining your goals. You’ll also be able to adjust your savings to meet a particular deadline if you see that, for example, the savings account for your vacation is not increasing enough to pay for your expenses when you leave in six months.
#3. Ditch the Credit Cards
Having a credit card can make it feel like you have the means and freedom to live a life that you want when the reality is far different. Some experts estimate that the average household that has monthly debt owes more than $15,000 on their credit cards. Rather than relying on your credit cards to fund your daily habits — eating out every day at lunch, for example, or buying grass-fed beef even when it’s not on sale — put them aside and bring them out only for emergencies. If you can’t do that without talking yourself into using it, consider freezing it in a block of ice for a few months.
This approach has two immediate benefits. First, you’ll still be able to access your credit card should you need it for an expense that is truly an emergency like an auto repair or to replace your home’s leaking roof. In circumstances like these, the few minutes of extra time that it takes you to thaw out the cube of ice won’t make a difference in the way you handle it.
On the other hand, those extra 15 minutes that it takes for the ice to melt can be all that you need to enact a 15-minute buffer. This 15-minute buffer is the time for you to access whether a purchase is an impulse or something that you need. Ask yourself if the item is something that you want or do you need it. Can you see yourself using it often enough to justify the cost? Is the item worth the time you’ll need to invest in working in order to pay off the credit card bill — with interest — when it arrives next month?
The above three tips are ones built to help you change your financial habits for the long term. Adopted in tandem, they can make your 2018 better.
Regards,
Ethan Warrick
Editor
Wealth Authority
