There is nothing more exhilarating than ringing in the new year, toasting the year past, and putting it in the rear view, where it belongs. A new year is a time of reimagining, taking note of where you are, and looking ahead to where you want to be. While it can be troublesome to always live in the future, hoping for a brighter tomorrow, some areas of your life require persistent planning and looking ahead, primarily your financial planning.
The new year brings with it the enlightenment of experience, reflection, and refocus. As you breathe a sigh of relief for the end of this year, remember to brace yourself for the next 12 months. Do not fear the oncoming experience; prepare for it. This blog will address the five crucial financial steps you should take in the new year to ensure you are ready for everything to come.
1. Don’t Put Off Paying Your Taxes
No one likes paying taxes, especially if you are self-employed, freelance, or own a small business. While you might negotiate payment schedules or postpone paying, it is better to get this financial obligation out of the way early. Especially if you have to pay back any government benefits from COVID. If you let it linger, hanging on into the following months, hovering in your mind, the debt will only complicate your plans for the new year.
Instead, focus on getting the tax bill taken care as early as possible in the new year. When you pay this year’s taxes, you allow yourself to plan for next year. Don’t let your taxes pile into one yearend debt in the new year; make quarterly reminders and pay a portion every three months. By separating your tax payment into four equal-sized chunks, you will find the debt less intimidating and easier to manage.
2. Revisit Last Year’s Budget
With the new year approaching, it is the perfect time for reflection, looking back at the previous year, identifying financial goals that worked or didn’t. You want to take some time to review your last budget, identifying areas of spending and saving that either worked or didn’t. Assess the successes and failures and re-evaluate your spending habits for the new year.
Do not just look at the big picture, such as the percentages of savings. You want to get into the nitty-gritty. How much money did you spend on fast food, coffee, and other luxuries, and how much went toward needs? By assessing your finances at the micro rather than the macro level, you will develop a robust understanding of where you can save money in the future. With the new year approaching, identifying spending habits and defining strict budgets is crucial.
3. Find a New Financial Planning Goal
The excitement of the new year can lead to reckless behavior, especially after a tumultuous 12 months. You need to create focus, an aim or objective that you can meet within the next 12-month cycle, channeling all the exciting energy into a new task.
While it is necessary to set goals, you do not want to make them too substantial. It is best to set small achievable objectives throughout the year. These smaller tasks can culminate in a more significant purchase. Still, without limiting expectations or breaking bigger goals into smaller, manageable pieces, you might lose focus, feeling bored or overwhelmed by the process.
Whatever you set your sights on, make sure it is realistic and attainable, matching your income and budget. For example, do not plan on buying a house in cash if you only make minimum wage and have no existing savings; instead, save for a down payment or focus on improving your credit score. Financial planning objectives must be based on reality or you risk falling into debt.
4. Remember to Plan for Fun
People often wish they could live an entire year only focusing on paying bills and saving money, but that level of discipline and reserve is not a realistic goal for most of the population. Everyone needs to have some fun and enjoy spending a little money now and again. While future planning and savings are essential, remember that life is about living and enjoying the time you have while you have it.
Every budget needs to leave room for travel or other allowances, like entertainment or shopping. While the majority of your financial planning should not account for wants and luxuries, it is not unsavory for up to 30% of your monthly income to go toward enjoying life.
5. Look for Other Helpful Advice
If you are new to financial planning or struggle with the idea of balancing a budget, you may want to look for a mentor or guide. Most people have friends or relatives that excel in personal finance. Do not be embarrassed to ask for help. Too many people feel ashamed of their spending habits, but remember that you are not alone carrying debt. Most of the population has some financial struggle, and everyone can use a little help.
Are you ready to start the new year? If so, get serious about your finances. Take control of your expenses and establish savings in the upcoming 12 months. If you need a loan, check out LoanConnect to find the best available options.