From our friends at City of Boston Credit Union!
Each year, after the stress of the holidays, we strive to make the new year better than the last. Resolutions are made with genuine hope of self-improvement, but some are annual wishes that never get completed for one reason or another. Becoming financially fit, even though it may seem unachievable to some, is a resolution that you can keep if you are serious about your finances.
Start by simply tracking your spending habits for a month, if a pen and paper won’t cut it, there are several online tools or apps to use, such as Mint.com. Just like a nutrition log, if you choose not to track it, eating that extra cookie did really happen and you’re only fooling yourself. So track every penny you spend in your first month.
At the end of your tracking, sit down and review where and how you spent your money that month. You’ll most likely be surprised at how much you spend on items that on a daily basis seem minimal, but buying a $3.00 coffee everyday adds up to about $90 a month. Now take each item you’ve paid for that month and categorize it as a need or want. For example, did you “need” coffee every day, or was it a “want?”
After categorizing each item, add up the “need” column and the “want” column. How does the total of the “need” column compare to your monthly take home income? Next add the “want” total to your “need” total, and compare that to your monthly income? Do you have any extra money left? If so, you’re in good shape, you should consider putting that extra money into a special savings account for unexpected expenses or save for a long-term goal like a new home or a vacation.
However, if the total of your “need” and “want” columns exceeded your monthly take home income, you need to reevaluate your spending habits. Most likely some of your “needs,” like a daily $3.00 coffee need to be shifted to the “want” column. You could consider a compromise with your self, only buy your coffee once or twice a week and bring it from home the other days. Calculate your monthly savings and use that money to start your special savings account for unexpected expenses or a long-term goal.
It may seem silly, but that is your first step to becoming financially fit. Once you start seeing that small amount build month over month, take a look back at your “needs” column and pick the next item that belongs as a “want” that you can adjust your spending on. It doesn’t happen overnight but with some patience and diligence you can become financially fit.