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Your Financial Life
By Alix Gorshow / Nov 30, 2016

6 Wallet Exercises for Budgeting & Saving Money This New Year

wallet workout

 

Getting into shape is the most common New Year’s resolution people make – and break. This year, why not give your wallet a workout instead? After all, your financial health is just as important.

Exercise 1: Financial Fitness Evaluation

Similar to how a personal trainer would want to evaluate your health status before you began a new workout program, the same can be said for your finances. You first need to know where your weakness and strengths lie so you know which areas to tackle first.

Take a look at your finances from the previous year and categorize your spending month by month to see how your expenses compare to what you’re bringing in. This is the time to evaluate where your money shortfalls may be – maybe you’re spending more than you’re making, or spending too much in one category and running out of money for another. Or maybe you don’t seem to have enough income after your expenses to rollover into savings.

Exercise 2: Trim the Budget Fat

Now that you’ve organized your finances and evaluated where your shortfalls may lie, it’s time to fix (or create) your budget. Consider making your new budget around 15 percent lower than it was previously. If you cut out too much too soon, it’ll be harder to adapt to it.

Here are five “extras” to consider cutting back on or eliminating in your budget:

1. Cable/Satellite: Evaluate how important this section is. If you can’t live without it maybe consider switching to Netflix or Hulu as a way of cutting costs while not removing this category completely.

2. Eating Out: This is typically the first category people try to eliminate all at once, which tends not to last because it’s too unrealistic. If you enjoy eating out don’t just quit cold turkey. Instead, cut back on how often you go out. If you typically eat out three days a week, try limiting it to one and put the money you would have spent eating out into your savings. You may be surprised at how much it adds up.

3. Subscriptions/Memberships: Sometimes you sign up for things and completely forget about them, especially if the money automatically gets pulled from your bank account. Look over your monthly (or yearly) subscriptions and see what things you aren’t utilizing anymore – such as that gym membership you paid for last January and haven’t used since.

4. Entertainment: Going out to the movies isn’t as cheap as it used to be; you could be spending anywhere from $9.00 a ticket to $20+ if it’s a 3D or IMAX show. Alternatively, consider visiting a Redbox if you want to catch a newer flick. To cut back on your weekend entertainment expenses, look into what free shows or events your town may be hosting and then get friends to carpool, walk, or take public transit with you in order to save money on gas.

5. Car: While you may not be able to eliminate this expense completely, you can greatly reduce the amount of money you spend on it. Consider using public transportation more often or carpooling to the places you have to travel to. The less you drive your car the less money you have to spend on gas and repairs. It’s also important to maintain the correct tire pressure in your tires for safer and more comfortable driving and to sustain better fuel efficiency.

The next category to trim fat from is the “fees” section. Paying fees are like throwing money down the drain –a giant waste and almost completely in your control. Budgeting and planning ahead helps you avoid late fees (as 35 percent of your credit score is determined by on-time payments) and ATM fees can be avoided by taking the time to find one that’s connected to your bank.

Exercise 3: Kick a Bad Financial Habit

That morning latte from Starbucks that you absolutely need each morning could easily be converted into you brewing your own coffee. Instead of paying about $4 Monday-Friday – which totals $960 a year – buy a bag of coffee that could last you two weeks, a month, or even longer.

Perhaps your bad habit isn’t as obvious as a Starbucks obsession; maybe you continually leave a balance on your credit cards, pay just the minimum, or you pay off your credit cards and charge them back up again.

If you struggle with paying off your credit card debt then think about transferring the balance to a different company, one that offers a 0% promotional APR on a balance transfer. That way, you only have to pay the money you owe instead of added monthly interest –so it’s important to try and pay off your card during the promotional period.

When deciding which debt to tackle first, you could start with paying off the card with the highest interest rate and save yourself the money that would have gone to interest payments; or you can pay off the lowest balance first, as a quick accomplishment may be the encouragement you need to get going.

Exercise 4: Bulk Up Your Savings

Saving money can seem like a daunting task, and sometimes we view saving as an ‘extra’ instead of as an essential. Instead, think of your savings account like a monthly bill – you have to pay your rent, utilities, phone bill, etc., and now your savings account. Have your bank automatically take the money out of your checking account and put it into your savings, that way you won’t notice the missing money.

In addition to growing your savings account, consider buying certain food items in bulk. Warehouses such as Costco allow you to buy items in larger quantities allowing you to stock up on nonperishable foods and frozen food. Make sure to look at the cost per unit of all the sizes so you know you’re getting the best deal.

Exercise 5: Stretch Your Dollars

The goal is to stretch your dollar as far as you can by looking for different ways to minimize your costs. Your energy bill can’t be eliminated, but it can be cut down by replacing your regular lights with CFLs, unplugging electrical devices that aren’t being used, adding window and door insulators, and by turning the heat down, wearing more layers or adding more blankets. Little things such as that can make a big difference in the long run.

Another great way to stretch your dollar is to use a credit card that pays you back. Many cards offer around 1% back in rewards or cash-back on the purchases you make. Some cards even give up to 5% back when you use your card at certain places.

Exercise 6: Monthly Budget Weigh-In

The key to making any resolution last is to check-in on your progress. Look at your budget and spending on a monthly basis to make sure you’re staying on track as well as checking for other ways to cut costs.

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