The start of a new year is a great time to re-evaluate your current financial situation and begin to implement some changes that will have a big impact on your overall financial picture.
Some people love New Year’s Resolutions, and others hate them. Regardless of whether or not you create resolutions, there are a lot of different ways that you can go about improving your own finances in the coming year.
In this article, you’ll find 15 practical and actionable ways that you can improve your finances in 2020.
1. Set Financial Goals
One of the most important things you can do is set some financial goals. Your goals are determined by whatever is important to you, and they help to give you direction and purpose.
My suggestion is to create a goal (or a couple of goals) for 2020, and then also create a few long-term goals as well.
Your goals should be specific and measurable, and should also have an end date or deadline.
For example, a good goal would be to save $5,000 by the end of 2020. And an example of a bad goal could be something vague like “reducing debt” (it’s not measurable and has no deadline).
Your financial goals could involve things like:
- Paying down debt
- Saving and investing
- Creating an emergency fund
- Making money
- Net worth achievements
2. Create a Budget
The budget is an important part of any financial plan. If you don’t already have a budget, now is a great time to create one.
Having an established personal or family budget is one of the best ways to get the most out of your money and cut down on waste.
Creating a budget may sound intimidating if you have never done it before, but it’s really not hard. I have an article, How to Create a Budget That Works, that shows exactly what you need to do.
Or, you can enter your email address below to get a free budget template that makes the process much easier and faster.
3. Identify Your Priorities
Budgeting tends to be a topic that evokes negative feelings. Most people associate a budget with limiting the ways that they can spend money.
In reality, a budget actually gives you control over how you spend your money, and it allows you to determine your own priorities.
While it is important to live within your means, you don’t need to be stingy and cut back in every single aspect of your life.
Creating a budget will help you to determine which expenses are the most important to you and your family (if you have a family). You can allocate your money according to your own priorities.
You don’t have to cut back in every area. The key is to know your priorities and save in the areas that don’t matter as much to you.
Personally, clothes don’t really matter to me. I spend as little money as possible on clothes, and my wife is the same. We also eat almost all of our meals at home and eat maybe one meal a week from a restaurant. Cutting back in those areas that don’t really matter to us allows us to spend more money on other things that do matter.
4. Track Your Expenses
While creating a budget is important, tracking your expenses is equally important. The budget doesn’t do you any good if you don’t know how your money is actually being spent.
You’ll need to decide on a system for tracking and recording your expenses. You can either use a simple approach like a spreadsheet, or use an app like Personal Capital.
If you’re manually entering expenses into a spreadsheet, my recommendation is to record expenses each day so you don’t miss anything (try using our free spending log).
5. Track Your Net Worth
Net worth gives a big-picture look at your overall financial situation. It’s much more indicative of wealth than how much you make. You can make a lot of money, spend it all, and have nothing to show for it.
→Related reading: 9 Convincing Reasons Why You Should Be Tracking Your Net Worth
If you want to build wealth, you should be paying attention to your net worth. Unfortunately, most people don’t know their net worth.
About two years ago I started tracking my net worth, and I wish I would have started earlier. My financial goals involve net worth, so it only makes sense that I track it on a regular basis.
Seeing my net worth has been a great motivator, and has caused me to think about how each financial decision will impact my net worth.
I use the free app Personal Capital to track net wor