The end of 2017 found many Americans scratching their heads in confusion. A massive tax cut bill was passed at the end of December, and let’s be honest, the whole year was basically crazy.
While it will probably take awhile for you to figure out what the tax bill means for you personally, there are a number of smart financial moves that you can put into place as you work through your next year’s financial goals.
Do a financial audit.
One of the most important financial actions that I take at the end of each year (and the beginning of the new one) is taking the time to do a financial audit. Let’s be clear, a financial audit is not an opportunity to rag on yourself for making financial mistakes. It’s an opportunity to look at what did and did not financially work for you in the previous year.
Financial audits are relatively easy to do but can be a little time consuming if you haven’t been using systems to help you look proactively at your finances throughout the year. I’m currently in the middle of doing my audit for 2017 and one of the expenses that I will be cutting back on is going out for coffee. I love going out for coffee and I typically only order the smallest sized coffee on the menu…and sometimes a little treat.
But, I’ve spent some time really looking at the math and those inexpensive visits added up to the equivalent of paying off a credit card. I average $5 per visit and typically go to the coffee shop five or six times every week. Six visits to the coffee shop equal $30 per week. Multiply that by four and that equals $120 per month or $1,440 spent in coffee shops during a year. That’s a trip to Colombia!
Where’s Your money going?
Besides looking at mindless spending habits, spend some time looking at your expenses. Be candid with yourself about what does or does not serve you well financially. Review the following:
- Phone service. Is it too expensive? Do you have an opportunity to get the same or similar service for less?
- Insurance policies. My car insurance policy has just come up for renewal. In my opinion, it’s way too expensive, so I’m looking to change my car insurance and have begun researching different policies so that I can make the switch.
- Groceries. This one is hard because you have to eat. Think about your grocery shopping habits. Ask yourself the following: do I go to the store too often? Do I experience a lot of food waste? Am I using my pantry staples and rotating them out? Do I take advantage of savings apps like Ibotta when I go grocery shopping?
- Subscriptions. Spend time checking all of the services that you’re subscribed to and get rid of the subscriptions you’re not using. Don’t forget to check your apps! You may need to go to the Google store to unsubscribe or change certain app subscriptions.
When working through your financial audit, spend some time thinking about what is important to you financially and what you would like to have happen during the year with your money.
If you love getting mani/pedis, getting your beard trimmed by a barber (for the gents) or going skiing, be honest about that with yourself. As you work on your 2018 finances you may find yourself resistant to making certain financial changes because it feels like you won’t be able to do what you enjoy.
As you work on your 2018 budget, add line items for those activities or services that you enjoy and figure out what you’re willing to spend in a year on those items. Because you’ve worked through your financial audit before this step, you may find yourself lowering or increasing the amount that you’re willing to spend on different parts of your life.
I love going out for coffee and it’s an important part of my social life, but it’s not worth spending $1440 a year. I also love getting manicures and pedicures. But, I only did that once last year in Dallas as a treat. I would prefer to have these every other month if possible, so I’m looking at the cost for manicures in particular because I’m able to do a pretty decent pedicure.
Being honest about what you enjoy in your life will help you avoid overspending because you’ve already practiced honesty in your budget.
Make it mindless.
Sign up for a free money management platform such as Wize-Fi or Personal Capital to help you track your expenses. These platforms help alert users to different trends in their spending habits and, in some cases, may alert users to the amount of fees or interest that they are paying for different loans, credit cards, or services that they’re using.
If you struggle with saving money, set up automatic savings withdrawals. You may work with your human resource department to save more money in your 401k or automatically send money to a hard-to-get savings account.
Set up as many systems as possible to make achieving your financial goals as easy as possible.
Talk to a tax professional.
Given the changes to the tax code that were signed into law at the end of December, it may a good idea to speak with a well-vetted tax professional about what you should expect in regards to your tax situation in the upcoming years.
Set audacious financial goals.
But, before you do, read Overcoming Underearning by Barbara Stanny. Then, set some bad-ass financial goals for the upcoming year that are attainable, but a little scary. Then, as Barbara Stanny encourages her readers to do, take small consistent actions daily to help work you towards achieving the financial goals that you’ve set for 2018.
Good luck taking charge of your finances in 2018!
What are your financial plans for this year? Any specific tool that is helpful? Let us know in the AdultingHALP Facebook community.