Making the Most of Your Paycheck in 2020
By Lynda Mason,
Group Manager, Post Road East Office; Woodmont Office
Now that we’ve started a new year – a new decade, in fact – many of you may have made New Year’s Resolutions to be more financially responsible, to spend a little less and save a little more. It’s a great approach to your finances, and it’s never a bad idea to take a close look at how you’re spending your income. But, if you didn’t make a resolution, that’s OK – only 8% of resolutions are kept, and 80% fail within the first month.
So, if you did set one and want to make sure you are able to keep it, or if you simply want to take a fresh approach to your personal finances this year, there’s no time like the present. The key is having specific, attainable goals and a strategy for success that is both challenging and feasible. With that in mind, here are a few tips that will help you adjust your strategy for saving this year – and keep your New Year’s personal finance resolution if you made one.
Define your goals
The first step when you’re looking to make financial changes is to know what you’re hoping to achieve. It’s hard to evaluate how well you’re doing if you simply say, “I am going to be more responsible with spending.” There are many reasons to reduce spending and increase savings – you need to identify your objectives in order to project how much you need to reduce your spending. A few examples include:
- Pay off credit card debt or mortgages
- Build retirement savings
- Start a college fund
- Save for down payment on a home or car
- Start a rainy day/emergency fund
- Plan for other major expenses (remodel, wedding, etc.)
Knowing what you are saving for provides motivation for sticking to your budget. Once you have decided what your goals are, you can set target amounts to start budgeting. You can always adjust these, but having a target in mind will help you understand what is truly attainable and what is likely to cause you to fail. In addition, if you are saving for known upcoming expenses, you can figure out exactly how much you need to save to reach the required amount by your deadline.
Understand your spending
The only way to evaluate how well – or poorly – you are handling your finances is to understand how you’re spending your income, what you’re spending it on, and how much you are saving. Track all your spending for a month to understand exactly where you paycheck is going – and if you are spending more than you earn.
Set a budget
Once you know how you have been spending your money, you can define a budget based on your spending habits and savings targets. At a bare minimum, you should know your fixed expenses (mortgage or rent, car payment, utility bill, cell phone, etc.), along with how much you want to put towards your new goals. This will allow you to define how much discretionary spending power you have for eating out, going to movies, etc. Remember, you can always be flexible within your monthly budgets. For instance, if you want to see two new movies, but have only allocated for one, you might look to spend less on dinners out for balance.
Eliminate bad habits
Take a look at your monthly activity and identify the things you do that could be costing you more than necessary. Are you paying full price for clothing? Are you eating out several times a week? Are you buying expensive Pay-per-View events every month? Are often late with your bill payments? There are many poor financial habits that could be costing you more than you realize. Take a look at these and look for ways to eliminate or at least reduce them.
Elevate good habits
There are many ways to reduce spending simply by using the tools available to you – most of them on your mobile devices, which you take everywhere. Loyalty programs offer member savings and allow you to collect points towards various purchases. Find retailers you like and try to stick with them. Don’t underestimate the power of coupons and sales – there’s no reason to spend more on something than you need to. This may also mean learning to be flexible with what you buy and when. One of the many Online Services the Milford Bank provides is the ability to create bill reminders to allow you to set preferences for receiving e-mail notifications reminding you that your bill has arrived and/or your bill needs to be paid. This tool enables you to control the entire bill payment life cycle. The Bank has also recently partnered up with Plinqit, a simple savings tool that allows you to set up and customize your savings goal and have Plinqit help you set aside a small amount of money regularly, on a schedule you choose. You can also earn money with Plinqit by watching videos and reading educational articles to learn more about money and saving.
There’s no simple answer for saving money. It all comes down to what your priorities are. As you evaluate your own priorities, if you need advice on how to save or where to put the money you’re saving, consult your bank’s financial advisors, who can help determine the best kids of accounts for your specific needs. Then, it’s all up to you.