It’s that time once again where we reflect on the year that was and plan for the year ahead. And with that planning comes the obligatory New Year’s Resolutions. You know what the biggest goals are for people each year? Getting out of debt and obtaining financial freedom.
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With that said, I’m welcoming Jason Brown, author of Margin Matters: How to Live on a Simple Budget & Crush Debt Forever – to guest post about financial goals for the New Year!
Most resolutions are out the window by the second week of January. However, there’s one thing we all want as a permanent change – more money.
Or as I like to say, more margin (also known as disposable income). So, how do we create more margin for ourselves? Learn why it’s so important to have more financial margin for our family, as well as how to make it happen this year both with creative budgeting and other financial tips!
Why financial margin for families is important
I can tell you from personal experience that living off a budget and getting out of debt will radically transform your life. Your mental and physical health will improve as you take control of your finances.
Anxiety related to debt
I spent most of my life agonizing over money. Growing up poor carried over into my adulthood and caused me to fret over every major financial decision. My hyperfocused mentality on money resulted in a tremendous amount of undue stress and anxiety—which began to adversely affect my health.
My money-related anxiety led to irritable bowel syndrome (IBS) and migraines. Additionally, my constant worry of money made it difficult for me sleep!
Physical health problems from money stress
Interestingly, people who agonize about money probably have enough of it—they just haven’t learned to manage it. The more money you have, the easier it is to be out of balance and stay out of balance.
Any time we have extra of anything we tend to be undisciplined with it. As a result, the stress and anxiety of carrying debt affects your physical wellbeing and will undoubtedly cross over to nearly every aspect of your life whether you realize it or not. Consider the following:
- Money is the No. 1 cause of stress for Americans—even more than work, family, and health problems.
- People who stress out about money are twice as likely to have a heart attack.
- Highly-stressed people are 65% more likely to suffer from back pain and muscle tension and 13 times more likely to suffer from insomnia.
Being empowered in your financial life
Fortunately, there are ways to avoid stress caused by your finances.
Often, when people are stressed about money, they hide from the problem. They don’t really look at how much they owe, they just ignore it until the problem is unmanagable.
But it doesn’t have to be this way! Research shows that people who take an active role in managing their finances are less stressed and more confident when it comes to money.
So let’s look at ways to become financially empowered (and no, I’m not just talking about getting more money. I’m talking about having control over your money, instead of it controlling you).
Face your financial reality and set goals
When we first got married, my wife and I were carrying about $60,000 in student loan debt! We had to decide how to face tackle this looming debt together.
Once we were married, everyone wanted us to take those “next steps.” We were bombarded with “When are you going to buy a house?” “When are you going to have kids?”
But we had already made a choice that decided our answer. “Not until we’re out of debt.”
We decided to work to aggressively pay off our debt in just under two years (using many of the ideas and strategies that follow). After we paid off our debt, we’ve worked toward becoming a one-income household to afford her the opportunity to stay home with our kids (something we both wanted).
So how did we get it done? Simple: budgeting and finding creative ways to save money.
By implementing the strategies shared in this post, my wife and I paid off nearly $75,000 in debt in under three years. Whether your goal is to get out of debt, build an emergency fund, pay for your kids’ college, or simply have more cash on hand for vacations, there’s no reason why you can’t do it with a change in money mindset and some creative ways to save money.
Why a budget is a good thing
Many people view a budget as money jail. My mom always says that she hates budgets because it goes against her nature.
The concept of a budget can sound restrictive, like it doesn’t allow you to do what you want, when you want.
But look at it from a different perspective: a budget actually allows you to allocate funds to the most important things in your life! Most of us don’t think a Starbucks coffee is the most important thing in their life, but if you’re buying a cup every day, your actions would say otherwise.
Instead, think about what’s important to you financially and how you plan to get it.
For example, if you love doing a big holiday celebration, plan ahead. December is the most challenging month of the year to manage our money because of everything thrown at us in the name of holiday cheer. We are faced with an overwhelming amount of decisions to make such as holiday parties to attend, where to travel, who to buy gifts for and how much, decorating the house, and more.
And guess what? All these things usually end up costing us more money than we anticipate. That’s why setting a holiday/gift-giving budget is imperative. And it’s easy to set up now! Tally up how much you just spent on the holiday season and divide that by the number paychecks you anticipate.
Each paycheck, put aside that amount until December comes. The holidays are going to be much less stressful this year!
The point is, don’t view a budget as a restriction, but simply a tool to track your money. Knowing where your money is going is the first step in the process of successful money management. Even if you’re committed to that daily Starbucks (no judgement!), just stick it in the budget!
Cutting expenses in the New Year
There are two ways to generate more financial margin: 1) earn more income; and 2) cut expenses.
Since most of us have no control of if or when I will receive a salary increase from my employer, I’ve realized that cutting my expenses is the most feasible option. Here are some easy ideas for saving money in the New Year:
Do you really need to pay $100 a month for 300 channels you never watch? Cutting your cable could easily save you $1,200 a year or more! Explore cheaper alternatives like an HDTV antenna (provides local channels for free), or even Amazon Prime, which provides a 30 day free trial and then movie and TV streaming, music streaming, e-books (and lots more!) for a much cheaper price than cable.
(Click here to start your 30 day free trial of Amazon Prime).
Cheaper alternatives for the gym
Do you have a gym membership that you never use? Be honest with yourself! With the average membership rate at $50 a month, you could save $600 annually by doing pushups at home, jogging at the park, or streaming free yoga workouts from YouTube.
Stop eating lunch out
I know, it seems easier to eat out than to fix lunch before work. If you’re used to eating out on most workdays, you may be paying $7 for a sandwich and $3 for a drink, for a total of around $10 per day. That can seem harmless enough, but it adds up quickly. That’s $50 per work week and can total $2,500 or more per year.
Avoid eating dinner out
This is a challenge for all of us, especially with busy lives and kids! What if you went out to eat just two less times per month? At $25 a meal (more like $40-50 after you have kids!), that would also save you way over $600 a year.
(Need ideas for cheap, healthy meals for families? Check out this post.)
RELATED: Easy healthy dinner ideas on a budget
Cut your grocery bill
Yep, you can still overspend at the grocery store! The No. 1 rule of grocery shopping is to have a list and stick to it. Showing up with a mental list is a recipe for disaster. Figuring out a way to cut just $25 a month in groceries, like eating vegetarian more often or finding ways to cook cheaper cuts of meat, will save you $300 a year. Plus, using coupon apps (like Ibotta) can help you save even more.
Find cheaper insurance
Shop around for different insurance policies! You might save $1,000 or more over a year simply by calling around and finding a cheaper car/home/life insurance policy.
You see how all this adds up? The seven ideas listed above total $6,200 a year. Do that for five years and you’ve saved $31,000! The easiest way to earn money is to save it.
Creative ways to save money
Couponing to save money
While we aren’t extreme couponers, we’ve become quite savvy with couponing when it relates to grocery shopping! Investing no more than one hour per week, we save an average 10-20% on our grocery bill by using online, paper, and Ibotta coupons.
Have you heard of Ibotta? It’s a free mobile coupon and cash-back shopping app. It gives shoppers the opportunity to earn cash back on select products by performing easy tasks, purchasing the product, then providing proof of purchase.
We started using the Ibotta app in 2016 and have earned over $1,000 over the past three years, deposited straight to out PayPal account. It’s been really helpful, and with a new baby on the way, I know it’ll continue to get us more savings!
Click here to register for Ibotta for free today!
Save on toys and kids’ clothes
The children’s toys and clothing markets are a huge racket! New toys are terribly overpriced, and often they’re not even what our kids need! Think about all the times you hear of kids having more fun playing with a cardboard box (“Daddy, look at my new home!”) than the toy that came in it.
I quickly learned that you can save a tremendous amount of money simply buying used toys or accepting free hand-me-downs. Thrift stores and yard sales are your friends here.
Also, my son has developed a trade and borrow system with all his friends which I appreciate. And toy rotations and play strews help toys stay “fresh.”
RELATED: Toy minimalism and how to do it right
Children’s clothes are another item I’d caution you not to invest a lot of money in, especially for babies! The first problem of buying new clothes is they are expensive, and the second challenge is that kids grow fast.
We were excited to receive a lot of newborn-sized clothes for our son, however, when he was born he had already outgrown them. Similar to toys, I highly recommend buying used clothes and accepting hand-me-downs. Check out local consignment sales for great, gently worn baby and kids clothes.
Spend time at the library!
Your public library is a hidden gem. If you haven’t already, find your closest library and go check out all the amazing free resources they have.
Instead of buying new books, CDs, and DVDs, you can borrow them from the library for free.
Libraries also have a wide variety of free children’s story hours and other activities that will help ease your entertainment expenses. There’s a lot of money to be saved and fun to be had by hanging out at the library with your littles.
Conclusions on getting out of debt in the New Year
Becoming financially fit is worth it, but it doesn’t happen overnight. There is no quick fix—especially if you desire changes that stick.
Compare getting your family finances in order to becoming physically fit. For both goals, taking baby steps is paramount to success. When exercising, you might have the goal of losing weight (or not, but just roll with it). With your finances, you might want to lose your debt.
You don’t work out and lose 30 pounds after a week, nor will you be able to pay off thousands of dollars in debt in a month. Even if you could do all that at once, it’s not likely to be sustainable! Instead, you need to develop new mindsets and change your behavior in order to achieve long-term success.
Maybe this is why so many of us are in such a dire financial situation. There is no quick fix for debt or low savings, and when we seek instant gratification, we’re usually disappointed.
Much like achieving fitness goals, conquering your finances goals for the New Year takes hard work, planning, and willpower. But when you do, it will be one of the most freeing accomplishments of your life.
About the author:
Jason Brown is the author of Margin Matters: How to Live on a Simple Budget & Crush Debt Forever. The book chronicles the journey of him and his wife’s efforts to pay off $75,000 of debt in three years. Additionally, Jason’s book shares how to create more margin in your life, no matter how much money you make.