Put your fiscal house in order.
Chances are you’ve got some accounts lying around for various purposes - January is a great time to get organized, backed by the fervor of resolution. Besides, with tax filing coming, it’s often easiest to get financially organized now. Work as quickly as you can before the job gets busy! Here are some things you should try to do every January:
1. Get organized
Everyone is different. But we find the ideal “step one” is getting all of your financial information together. We cannot recommend Mint.com enough for this - it’s the best free tool going to track income, expenditures, assets, and liabilities. A decent Google Docs or Excel spreadsheet is fine, but Mint is fabulous for your primary accounts in that it categorizes all of your transactions automatically. It’s amazing; try it.
2. Start or top up an emergency fund
It’s important to understand “emergency.” Emergencies are not being short a couple of bucks in the middle of the month - emergencies are catastrophic events like a car breakdown, sudden unemployment, etc. Try to stash some money aside, however much you can, and don’t touch it.
A lot of finance people have a target - 6 months of salary, a year. We think guidelines do more harm than good. It’s daunting to hear that you “should” put away 6 months of salary when you are fighting to pay the bills, and then you might conclude saving is hopeless. At the end of the day, every little bit helps. Ignore the scolds and do your best.
3. Rebalance your 401(k)
Take a hard look at your allocations and balancing. Many 401(k) plans give you lots of investment options, and it’s important to review them periodically. Make sure you check both how new money is invested and how the old money you’ve been investing is allocated - performance may have thrown things off. You may have funds you want to transfer around.
We are not your financial advisor and consequently can’t tell you how to invest - get help if you are uncomfortable. Financial advice is not just for rich people!
4. Develop a debt plan
Most of us have debts (us included!). Most of us cannot simply make them go away. So come up with a plan of attack. There are lots of methods:
- Pay off the smallest accounts first, then attribute the payments for retired debts to other debts
- Attack the highest-interest debt first then the lowest-interest debt
- Roll the debts up in a consolidation loan and pay a fixed monthly payment
All have benefits and drawbacks. Take a hard look at your own behavioral patterns and figure out what’s right for you. Maybe try some trial and error! As long as there is a plan.
5. Be optimistic
It’s a new year. Now is often the best possible time to get yourself out there if you want a new job or higher pay. Since most firms finalize human resource budget processes at year-end into February, there are never quite as many openings as there are right now in most fields. Go out there and get one! Things are getting better, after all.
