I am a true believer that when change needs to happen, you make changes then. Don’t wait until the new year! With that being said, I love to hit the ground running at the beginning of the year. There is beauty in the fact that there is a sense of newness, a clean slate. One thing that can really help a new year get off onto the right foot is focusing on how to manage money better, minimizing financial clutter, and being more organized and strategic financially.
In an article I wrote last month, I said take it easy. Don’t over-do it on the financial tasks. Take time for family. Take time to be in the moment and only focus on what is absolutely necessary. Now it’s time to forget that message and kick it into high gear. Doing a few things now can make managing money throughout the year easier.
January is the month that I set up our financial lives for the year and then I make small tweaks as changes happen throughout the year. I do my best now to anticipate what each month will look like based on facts I know now (i.e. vacations we have planned, fluctuations in our income, weddings, and more). I minimize as much clutter in our financial lives as possible so that the rest of the year I can focus on living and not worry about money.
January is the perfect time to set yourself up so that you do in fact manage money better in the new year. So, if you are wanting tips on how to manage money better in the new year you are in the right place! Focus on these things in January and then your day-to-day financial lives wil be organized for the year.
8 Tips for Starting the Year Off on the Right Financial Foot
1. Shred papers
Let’s start with a quick feel-good win! This is my favorite New Years Day task. I don’t know why it gives me so much joy, but it does. I think it may have to do with getting things out of the house after new things have just arrived. Carrying bags of shredded paper to the recycling bin makes the house feel lighter.
We are becoming more and more paperless every year. However we do keep physical copies of our tax returns and have historical records we’ve hung on to in a filing system, and some how there are random stacks of papers in places (Like all of the papers our daughter brought home from school). Each January 1, we go through that filing system (last year we went from two cabinets to one!), and our stacks of papers.
We make sure to keep those things that are important to us and give them a home (i.e. some of those school papers are adorable, so I will put the ones that are cute in her memory box) and shred anything we no longer need to keep. If you aren’t sure if you need to keep something or not send an email to your legal, tax, CPA, or other appropriate professional.
We make a pile and it seems to take most of the day to actually get them shredded. Last year our oldest (4 years, almost 5) really loved to run the shredder, so here is a reminder to involve your kids where you can!
2. Set goals or intentions for the year around who you want to be, have, and do.
Again, goal setting is not limited to January 1. You may already know what your focus is for the year. Goals are a fluid thing that change and need to be updated as goals are reached and life changes. However, January 1 it’s a great time to really sit down and put them to paper.
Thinking big picture and really dialing into what it is you want to be, have, and do, most in the short term can provide a lot of clarity to how you want to spend your time and resources in the year and truly help you become a better money manager. It can give you a more clear reason of why to say no to some things and yes to others.
I have two resources I want to share with you. First is our free goal setting guide. If you already know what you want to focus on but just want to put it to paper, or you want to get your kids involved in the discussion, go print our free download. We do our goal setting at breakfast on New Year’s Day. This year we will talk with our Kindergartener about what she wants to be, have, and do, most.
The second resource is my favorite planner. With technology I need one central hub to keep all of the things, and that is my old school physical binder. I want to recommend two planners to you, both made by Ink and Volt. I love the simplicity and effectiveness of their planners. I personally have used their Goal Planner. It does a fantastic job of keeping you on track with your goals and thinking about what it is you want most. It helps you hone in your weeks, quarters, etc., and helps you go back to review what you said you wanted and update them as needed.
The second planner of theirs I love is the Daily Reflection Planner. If you feel like your goals are dialed in already and you are steady in the boat, perhaps shifting to focusing on your mental well-being in the new year could be powerful. This daily planner outlines prompts for each day centered around topics in positive psychology (gratitude, meaning, etc.). In the new year this planner may be a great way to help you stay focused if visiting your goals regularly doesn’t sound like it would be fruitful for you.
3. Update Your Net Worth Statement
This is my second most favorite activity. On January 1 and July 1 we update our net worth statement, so that we see how our assets have increased and how our debts have decreased. It’s fun to see how our investments have done and it gives us another opportunity to celebrate that we paid down debt (this last year we did good damage to our debt by eliminating two debts that we had, so I’m looking forward to being reminded that we did that!).
Updating your net worth statement can really point out what you are proud of when it comes to your financial life, and also give you an emotional response to where you need to focus on improving things.
As a side note, when we make this update to our net worth statement, we print a copy of it and put it in our estate binder. That way we are keeping the binder reasonably up-to-date. We are at a point where we aren’t changing accounts much, just the values are changing so twice a year seems like a reasonable frequency for us.
4. Analyze your Debt
This one is especially important if you took on new debt in the past year (mortgage, student loans, car loan, credit cards, etc.). Debt is a reality at times. You may just be getting through the debt accumulation phase of life (yes that is a thing!) or life may have happened. Perhaps it’s a motivator for wanting to learn how to manage money better!
Being strategic about paying it down can be helpful to saving yourself money in terms of interest expense and/or simply keeping yourself motivated to continue paying down debt. Taking time to review your debt, the interest rates you are being charged, and determine a strategy for how you want to pay it down over the next year is a strong move! Make sure to incorporate your decisions into your cash flow above to make sure you follow through on your goals.
As of now (December 28th, 2021), federal student loans are not accruing interest and payments are not required until May 1, 2022. This may (or may not!) impact your decision on where you focus extra funds you have to pay down debt through the year. Reviewing your debts and thinking about your repayment strategy is one example of how to manage money better.
5. Set up a cash flow for the year
If you really want to know the secret for how to manage money better: it’s a cash flow statement. This is most often used in the business world, but we have used one in our personal lives for almost a decade. It opened our eyes when we set ours up for the first time, because it really brought to light months where we could anticipate things would be tight and months where there was extra. It has helped us to better manage money so that we have many more months where we have a surplus of income.
In life, sometimes when we see a little extra in our checking account, we can get spendy, but having a cash flow statement can really help rein that in. The cash flow statement reminds us a tight month is coming up and can help us reel that feeling in or it can support that we can do something “extra,” because we know upcoming months have a surplus of income as well.
If you aren’t sure what a cash flow statement is, basically you set up a spreadsheet and anticipate all income for the year and all expenses for the year, broken out by month. The goal here is not perfection, but getting a pretty solid outline together.
A few years ago, Dr. Thia realized that three times a year she had large bills (property tax, season tickets for Mizzou football games, and contributions to grandkids education accounts). She realized if she didn’t plan throughout the year for those three things, it put her in the red those months. By setting up a cash flow, it made those expenses really stand out. Now she puts money into a savings account each month so that when those payments roll around she has money available to pay them. She went from playing catch-up to planning ahead. That’s how to managing money better!
6. Update passwords spreadsheet in estate binder
As you are working through your net worth statement, reviewing your debts, etc. You may realize that there are new accounts and passwords that you have. As we update our net worth statement, we also update our passwords spreadsheet in our estate binder.
I’ve mentioned our estate binder now a couple of times. This is something that we put together to let our loved ones know our wishes, our assets, etc., in the event the worst were to happen. This is something we provide as part of our estate planning course Written Wishes. If you want to start putting together a thorough estate plan, without the stress and cost of having to figure it all out on your own head over to the course page to learn more!
7. Check Credit Report(s)
Annualcreditreport.com. You are entitled to check your three credit reports for free once a year. That means every four months you can check your credit for free. If that is too much to remember, you can check them all on the first day of January 1.
It’s critical to check them for inaccuracies and to make sure you are staying on top of your financial well-being (a credit report is like your financial check-up). If you expect to move, take out a line of credit, or change jobs, it’s even more critical to check your credit reports. However, it’s important even if you aren’t planning for those things, because if there are inaccuracies the sooner you can get them fixed the better and you can’t know if life will happen.
8. Organize Your Home – Giving Special Focus to Things that Are Especially Unorganized
Junk drawer anyone? I need my house to be organized. If it’s not, it creates chaos for me mentally. You may not be an over-organizer, like I am. That’s ok! However, I want to encourage you to really take stock of what you have in your home. One way to do this is by organizing all of those annoying things that you put off organizing.
Being a better money manager is using more of what you already have. If we can find contentment with what we have, find things that we forgot we had, and use them more, in the new year it can remind us that we don’t always need to pull up the Amazon app or head to the local store when you think you need something. You’ll be more likely to remember that you already have something that will work.
Take time to go through the junk drawer and organize it, organize the craft materials that fall out of the cabinet when you open it (I hope it’s not just me that this happens to!), and putter in your storage area a bit. Donate things you haven’t seen for years and have no immediate use for. Do some Marie Kondoing or Home Editing if you will. You really can do a lot more with less.
Free Resource – Becoming a Millionaire Next Door
If you found this article on how to manage money better more helpful, MPower Co also has a free resource that you’ll love! It’s all about how to become a millionaire next door. Becoming a Millionaire Next Door takes focus and time and having strong financial planning practices! Click on this link to get your free download to be more financially savvy.
