Are you living paycheck to paycheck? Do find yourself wishing you could save more? This is a great time of year to start planning for a financial “reset” but it requires two basics: A little homework and a lot of discipline!
Your homework is basic; making a realistic list of all income and expenses. The income can be the easy part but the expenses come with a lot of details. There are the obvious expenses like rent/mortgage, car payments, utilities, and insurance. The hard part can be in items like groceries, gas, school expenses, eating out, entertainment, and much more. Take the time to really think about all of the miscellaneous cash buys that you make. David Bach used a term in his book Finish Rich called “the latte factor.” It is the simple idea that the small trivial things we spend money on everyday add up to a large amount over time. Be sure to give some thought to this area.
The discipline is an ongoing effort and the reward is seeing your savings go up and your debt go down!
Here are a few ideas to focus on:
- Set goals and make them a priority. This will be the benchmark for every financial decision or purchase that you make
- Build or repair your credit. Get a free copy of your credit report at annualcreditreport.com so you know what is on it. This will focus you on what really need to be “fixed”.
- Save cash! If you can do it automatically through payroll deduction, do it! This has shown to be a very successful way to save. You’ll be surprised at how fast you adjust to the new take home amount
- Reduce your debt. The sooner you pay off debt, the sooner you can then take that money and increase your savings. If possible, put off large purchases such as a car and new credit cards until you’ve made your new home purchase.
- Become more educated. Visit with a mortgage lender to help you understand what you can afford. They can help guide you in what you can do to get financially ready to buy a home. Also, visit open houses in areas you would like to live in order to understand what your money will buy.
It can sometimes seem like such a long road. If you get a little off track, and you probably will, just keep looking ahead into 2013 and work towards being better positioned for buying the home of your dreams.