Plenty of Americans are worried about their finances. In fact, the everyday cost of living proves to be the most common source of financial stress in the U.S., a GOBankingRates survey found.
If money matters are keeping you up at night, you might be able to eliminate a lot of your stress with a financial makeover that’ll get your money on track.
Keep reading to find out what steps you need to take to remake your finances and set yourself up for financial success in 2019.
Mend Your Relationship With Money
To remake your finances, start by understanding what drives your financial decisions. “People start out with all this ambition then they fall off the bandwagon because they haven’t addressed the underlying issues they have with money,” said Karen Whaley, a financial lifestyle coach and founder of Satisfied Spending.
It can take time to heal your relationship with money, she said. But you can get started by becoming a more conscientious spender. That means asking yourself before you make a purchase for anything that’s not a necessity whether it gives you hope for your future. “If it gives you hope, odds are high it will end up a happy purchase without regret,” Whaley said. If it doesn’t, don’t make the purchase.
Develop a Vision for Your Financial Future
To motivate yourself to improve your finances, Whaley recommends developing a vision for what your life will look like once you’ve eliminated financial roadblocks. For example, if you have debt you want to pay off, imagine the things you’ll be able to do once that debt is gone — such as spending more time with your kids or traveling more in 2019. “It’s not just about money — it’s about getting the life you want,” she said.
Track Your Spending to Gain Control of Your Money
You can’t have a good relationship with money if you’re ignoring it. That’s why you need to track your spending. “You need to know where the money is going right now,” Whaley said. Once you start tracking your spending, that awareness will give you a sense of control and the ability to make a change.
Whaley had a man in one of her debt-reduction classes who had a goal to pay off his auto loan so he could save more for retirement. By tracking his spending, he realized that his smoking habit was costing him as much each month as his loan payment. Having that awareness helped him realize smoking didn’t give him hope and that gave him the motivation to quit, Whaley said.
You can use budgeting apps to track your spending, an Excel spreadsheet or even a pen and paper. Choose the method that works best for you.
Pay Fewer Fees
Take the time to look at your accounts for fees that could be avoided, said Renee’ Caputi, a wealth coach and founder of Enhanced Solutions Advisors. For example, if your bank charges a monthly maintenance fee on your checking account, look into the requirements you need to meet to get the fee waived. Often, you can avoid a monthly fee by keeping a minimum balance in the account or by making a certain number of minimum transactions.
Another unnecessary fee you can eliminate is a credit card annual fee. There’s no need to pay $95 a year or more to have a credit card when you can get a credit card with no annual fee that actually rewards you for using it. By eliminating unnecessary fees, you’ll have more money to put toward your financial goals.
Set Up Separate Accounts for Spending and Bills
Knowing where your money is going will help you figure out how much you need to cover necessities and bills each month and how much is left over for non-essential spending. The next step, though, is setting up a system to ensure that you don’t overspend on things you don’t need.
Caputi recommends setting up two checking accounts: one for bills and one for non-essential spending. Set up automatic payments for your bills from your primary account, and always keep enough money in that account to cover those bills, which you can do by setting up an automatic deposit from your paycheck. Then the remainder of your paycheck can be deposited into the spending account or a savings account. By keeping bills and spending money separate, you won’t have to worry about overspending on things you don’t need, plus you’ll always pay your bills on time.
Find Ways to Lower Necessary Expenses
When remaking your finances, don’t overlook savings you can achieve by reducing necessary expenses. Yes, you have to pay for things such as food, transportation and housing, but there are plenty of ways to cut these costs.
For example, Whaley recommends creating weekly meal plans. This will help keep your grocery bill under control if you make meals based on what’s on sale, stick to your shopping list and keep your pantry stocked so you won’t be tempted to eat out. You can use free meal planning apps such as Mealime or FoodPlanner to make the process easier.
Get a Credit Card That Rewards You
If you’re responsible with credit, you can use rewards credit cards to get some of the things on your “wants” list at little to no cost. “I love rewards cards,” Caputi said. “I’m a huge proponent of them.”
For example, you can reduce or even cover your travel costs by using a rewards credit card to earn points for purchases then redeem those points for flights, hotel stays or just for cash. Caputi recommends using rewards cards to pay for bills and necessary expenses you’d otherwise pay for from your checking account to quickly rack up points without overspending. You’ll want to look for cards that offer you the chance to earn extra points on gas stations, groceries, rideshares and transit — necessities you’re already paying for.
Stop Letting 'FOMO' Influence Your Purchases
Another way to improve your finances in 2019 is to stop letting fear drive spending decisions. “We purchase a lot of things out of fear — fear of missing out,” Whaley said. So before you buy something, ask whether you want it only because you’re afraid it won’t be on sale again or because your friends have it and you don’t want to feel left out, she said. Then ask yourself what will happen if you don’t buy the item. “You’ll tap into whether fear or hope is driving the decision,” Whaley said.
Build an Emergency Fund
Having a stash of cash to cover emergencies is key to your financial health. If building an emergency fund has been on your to-do list, one way to make it happen is by eliminating unnecessary expenses and putting that money in savings instead, said Brandon Hayes, a certified financial planner with oXYGen Financial.
For example, Hayes said he often sees clients spending $10 to $15 a day eating out at lunch. That’s $50 to $75 a week. To eliminate this expense and grow your emergency fund savings, he suggests taking the time on the weekend to plan and prepare lunches for the week. Then have the amount you would spend on eating out automatically deposited from your paycheck to a savings account. “Paying yourself first and saving off the top can be very effective,” he said.
Make the Most of Your 401k Plan
One of the best ways to get ahead financially in 2019 is to contribute to a 401k retirement plan at work, especially if your employer matches your contribution. “If you’re overhauling your finances, if your employer offers a match, you’re a fool not to contribute the max to get the full contribution,” Caputi said. “Otherwise, you’re giving away free money.”
Check your employee handbook or the website for your company’s retirement plan to find out what percentage of your pay you need to contribute to get the full employer matching contribution. If you’re setting aside less than the amount needed to earn the full match, you could be missing out on free money.
Create Several Buckets of Retirement Income
If you’re already maxing out your retirement plan at work, start creating other buckets of retirement savings, Caputi said. Withdrawals from a 401k are taxed as regular income. “You don’t want all of your income coming from that one bucket,” she said. Instead, you want to reduce your tax bill in retirement by having a source of tax-free income, such as money saved in a Roth IRA account.
In 2019, you can contribute $6,000 to a Roth IRA — up from $5,500 in 2018. You can open a Roth IRA through an investment broker.
Implement a Debt-Payoff Plan
If you have high-interest debt, create a plan to pay it off. Caputi recommends making a list of your debts with the amount owed, interest rates and minimum payments for each. Pay as much as you can toward the debt with the highest interest rate first while making the minimum payments on your other debts. Tackling the highest-rate debt first will reduce the total amount you pay over time.
Forgive Yourself for Past Money Mistakes
If you want to move ahead in 2019, stop looking back. As you track your spending and eliminate unnecessary expenses, don’t get hung up on the financial missteps that might have led to overspending in the past. Instead, simply acknowledge your mistakes and forgive yourself for making them. “Otherwise, you won’t move forward,” she said.
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About the Author
Cameron Huddleston is an award-winning journalist with more than 18 years of experience writing about personal finance. Her work has appeared in Kiplinger’s Personal Finance, Business Insider, Chicago Tribune, Fortune, MSN, USA Today and many more print and online publications. She also is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances.
U.S. News & World Report named her one of the top personal finance experts to follow on Twitter, and AOL Daily Finance named her one of the top 20 personal finance influencers to follow on Twitter. She has appeared on CNBC, CNN, MSNBC and “Fox & Friends” and has been a guest on ABC News Radio, Wall Street Journal Radio, NPR, WTOP in Washington, D.C., KGO in San Francisco and other personal finance radio shows nationwide. She also has been interviewed and quoted as an expert in The New York Times, Chicago Tribune, Forbes, MarketWatch and more.
She has an MA in economic journalism from American University and BA in journalism and Russian studies from Washington & Lee University.