January rings in the New Year, a sign of optimism, and the annual promise of something new: adopting resolutions, setting goals and looking ahead. It’s also a time to reflect on the previous year. Making resolutions is common for many, but less than 40% will actually achieve what they set out to do.
Nevertheless, for those looking for improvement in their financial health, here are some good habits to follow at the beginning of each year.
January is a good month to…
1) Calculate your net worth
You know how to do this. Total up all your wealth building assets – home, investments – subtract your debts – mortgage, credit cards, car loan, and voila – the resulting total is your net worth, or in other words, the current picture of your financial standing.
There are lots of online calculators that help you do this, but don’t stop there. Redo the calculation at least once a year. Create your own spreadsheet so you can compare several years. It will help you see if you’re moving in the right direction. Otherwise, how can you know if you’re getting ahead?
Also read: Your financial plan is a compass
Focus on what you can do to improve your finances, and if you find yourself getting off track, do some course corrections and carry on.
2) Revisit your goals
January is also a good time to review your goals. If you have a spouse or partner, set aside some quiet time this month to have the money talk. Have an honest discussion about your short-term and long-term goals and check to see whether you are still on track to meet them.
Or, maybe your situation or priorities have changed, and you need to reassess. If something is not working, go back and modify. Since you can’t know what the future holds for you, a period of five years is a manageable target.
Map out a few steps for the current year that will see you heading towards a better financial situation.
3) Come up with a plan to deal with your debts
The flurry of gift shopping is over, and those credit card bills will be arriving this month. Can you pay the entire balance, or did you overspend again this year?
If your debts have really piled up – not just your holiday credit card use, but personal loans too, you have some options to combat your debt once and for all.
First, take a hard look at your budget and figure out how much you can put towards your debts.
Consider the snowball or avalanche method of debt repayment. If you’re really pinched, it may make sense to roll your debts into one monthly bill with a consolidation loan, a secured or unsecured line of credit, or even refinance your home.
Now, while you’re killing your debt, make sure you also stop using your credit cards. Incurring new debt will only make matters worse. The motivating payoff is having more future household cash flow.
4) Take advantage of Best Buys for January
Retail sales drop off after the Christmas rush, but January is a good time to find some great sales.
Retailers use this time to take advantage of people’s New Year’s resolutions, and losing weight/getting fit and getting organized are often in the top three.
- Save on exercise equipment, fitness gear (including athletic shoes), gym memberships, and even bathroom scales.
- Household storage items help you to organize your closets.
- Stores hold “white” sales in January, so stock up on towels and bedding.
- Furniture stores need to make room for the February new arrivals, so don’t hesitate to haggle for a discount or freebie.
- Electronics that didn’t sell at Christmas – especially TVs and audio equipment.
- Winter clothing may be picked over by now, but prices on the remainder will be at rock-bottom.
- And, of course, there’s clearance pricing on all Christmas items – decorations, wrapping paper, chocolates, etc.
Happy New Year everyone!