When it comes to New Year’s resolutions, one of the most powerful commitments you can make is to get your finances in order. But where do you start to achieve financial well-being? Begin with taking control of your spending by creating and implementing a monthly budget. When you budget successfully, you can feel empowered and in control of your money by ensuring your money is going toward what is most important. Another measure of financial well-being is net worth. Make financial check-ins a habit and chart your progress over time.
Budgeting helps you understand where you are today and where you want to be in the future. Essentially, it enables you to organize your cash flow. Your budget begins with estimating your income from all sources. Do you usually receive a tax refund? Did you know you can adjust your tax withholding to use some of that money now and get a smaller refund later? Use the IRS Tax Withholding Estimator to get off to a great start this year.
Next, estimate your current living expenses and categorize them into essential categories such as housing, utilities, and groceries, as well as discretionary categories like entertainment or eating out. Once you know where your money is going, you can assess whether you will make any adjustments. If you have questions or need help, work with a Money Coach for ideas. If you’re an MSA member, login to your Digital Platform to check out MSA Wallet®, an online money management tool for viewing financial accounts, tracking expenses, and creating a budget.
Now that you have a better picture of the money coming in and out, consider what you may need to adjust. Having a budget can allow you to organize your cash flow so you can start an emergency savings account and do something positive about paying off your debt. Suppose there’s a shortfall between your monthly obligations and how much you have coming in. In that case, you may want to consider options to increase your income, like working a second job, renting out a room, or turning a hobby or interest into an income opportunity. Even if you only work for a few months out of the year as a freelancer or delivery driver or earn income from coaching or being a referee, earning extra income can help you get closer to achieving your financial goals, be it paying off a credit card, saving for a vacation, or something else.
One of the most important things you can do to organize your finances is to create a net worth statement. Start by gathering your financial statements, bills, debts, and savings statements. Creating a net worth statement is as simple as listing all your assets and subtracting all your liabilities or debts. You can even use a free net worth calculator like the one provided by FDIC.gov. Your net worth will likely change, so update it at least annually. Measuring your net worth over time allows you to see progress as you pay down debt or increase your savings balances.
Talk to your Money Coach about your New Year’s resolution to organize your finances. Your Money Coach can explain the process, guide you toward achieving your goal, and help you check off a New Year’s resolution.
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