It’s January and many people are thinking about New Year resolutions. Some of the most common resolutions among Americans have to do with becoming healthier, both physically and financially.
Have you ever considered setting a resolution to become a better money manager?
If you have, then start this year by setting a few simple financial goals. It could be as simple as saving some money for a special occasion or a camping trip when the weather gets warmer.
Make sure your goal is achievable within a reasonable amount of time. And make it something that’s easily tracked, so you can see whether you’re making progress and will know whether you’ve completed your goal.
For example, save $500 for a new laptop by the end of the school year or $5,000 to buy a used car by your 17th birthday.
Now that you have a goal, how do you get there?
That leads us to another good money habit for 2014: keeping a spending diary.
The purpose of a spending diary is to keep a record of your daily actions so that you can look back and remember what your money was spent. For two weeks, a month, two months, or for the rest of your life, write down every penny you spend, what it was for, and how much it was.
Break your spending into categories: needs (food, shelter, comfort, all the necessary things) and wants (things like entertainment or cell phone data charges).
Total what you have spent and ask yourself this question: “Do I want any of that money back?”
If you find that you regret some of your purchases, then it’s time to start thinking more deliberately about your spending.
For example: I found myself spending about $4 a (work) day at a shall-not-be-named coffee shop for my favorite drink. This cost me $20 a week and $80 a month! Spending $4 at a time was nothing, but when I looked at the total, I started to think about all the other things that I might have been able to do with that $80.
Your challenge is to track your spending. It doesn’t matter how you do it. Use a notebook, a spreadsheet, a napkin, or text it to yourself. Just KEEP A RECORD. Then start thinking about all the ways you want to make your money work for you and see if your spending is helping you achieve your goals, or taking you further and further away.