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Happy New Year! To kick off 2019 our resolution is not to write a blog about resolutions, because we all know the pain of making promises too big to keep. So, this year we’ve decided to do things a little differently.
Whatever your 2019 goals — from joining a gym to rescuing a puppy — follow our Money in Motion campaign and make your money grow as much as you do. Our series will feature blogs, podcasts, videos, social media posts and colorful bar graphs designed to empower smart financial decisions throughout the year. Because whether you’re running a small business or hoping to get a better handle on your personal finances, who can’t use a few tips and tools to keep their money in harmony with their life?
We’ll focus on six smart actions behind creating a healthy relationship with money: Plan, Save, Borrow, Protect, Earn and Spend. Down the road, you’ll also find budget planners and calculators to make the math a little easier. Let’s kick things off with planning: the key to steering money in the right direction in the new year.
The most important thing about a plan is actually having one. No one likes to sit down and take account of their finances, but it’s that all-important first step that sets the foundation for the entire year. Just don’t put too much pressure on yourself to change everything all at once.
“Small change is good change,” says Umpqua VP of corporate responsibility Nicole Stein. “It’s important to find a quick win and take it to give yourself a little momentum. Lofty goals are great. But breaking them down into more attainable milestones is even better.”
With that in mind, here are 5 simple goals and a few milestones to shoot for along the way.
Other than accountants, no one likes thinking about taxes in January. But the amount of money you owe, or the refund you’ll receive, will impact your budget for the rest of the year. Why not get them done as early as possible?
The new tax law will mean lower tax bills for many—but not everyone. 2018 brought a larger standard deduction ($12,000 for singles, $24,000 for married filing jointly) which means you may not get a tax break for many of the items you’ve deducted in the past. This Yahoo Finance article offers ideas to maximize deductions and other ways for individuals to save on their tax filing in 2019. If you’re a business owner, you may even be able to lower your business taxes with a few smart steps.
Milestone: Pick a date to get your taxes done well before April 1st and treat yourself to dinner and a movie when they’re completed.
Studies show people tend to spend less when using cash instead of credit. That’s why many people swear by the envelope method. Simply put cash in envelopes to budget for day-to-day expenses. Each envelope corresponds to a specific spending category. There’s an envelope for groceries, one for transportation and one for fun stuff like movies and eating out. Once the fun envelope is empty, you’re not allowed to spend on fun for the rest of the month.
“I love good food,” said Gabe Norris, VP innovation product lead for Umpqua. “I looked at what I was spending money on and realized I could save money if I started taking the bus and walking into the office. So that’s what I did. I saved a few hundred bucks on parking and gas so I could eat out more. There’s no one magic solution. You just have to find what works best for you.”
Lauren Livick, a digital client advisor for Umpqua, encourages her clients to employ the 10-second rule before making purchases. “Take 10 seconds and ask yourself three questions before you make any purchase. Why am I buying this? Do I really need it? Am I really gonna use it? It’s almost too simple but it’s a great way to spend less on things you don’t need.”
Milestone: Figure out how much you were spending to eat out and spend 10% less this year. Here’s some advice that may help along the way.
If you’re able to spend less, it follows that you should be able to save more. But if that’s true, why do most Americans have less than $400 saved for an emergency?
One of the most effective ways to save is to make it automatic. See if your job offers automatic deposits into your 401k and if it does, take full advantage. Pick a checking account that comes with complimentary savings options and set up a recurring automatic transfer, so a portion of your money goes right into savings before you have a chance to spend it.
Milestone: Set up a simple savings goal for 2019. For example, if you want to save an extra $5,000 this year, start saving a little more than $100 a week and you’ll be there by year’s end.
Not all debt is created equal. If you have credit card debt with a high interest rate, it makes sense to pay off that debt first. This is known as the “avalanche method” where you pay off high-interest debt as fast as you can, to lessen the interest you’ll pay over time. If the avalanche method is too drastic for your budget, give the “snowball approach” a try. It’s where you pay off your smallest debt first, and then tackle the next biggest one after that. Nerd Wallet has a handy debt avalanche calculator and a debt snowball calculator that can help you determine the best plan for you.
When was the last time you checked your credit score? Do you have excellent credit? Good credit? Bad credit? FICO scores are used by lenders and an excellent credit score can make buying a house or getting a small business loan a lot easier. If your credit score is not what you want it to be, a new program from Experian kicks off in January that can help.
Whether you’re old school and like to write everything down on paper or prefer to do everything on your phone, the most important thing is to find a budget that’s right for you and stick to it. One popular budget plan is the 50/30/20 plan, which allocates 50% of your money for necessities like food and rent, 30% for things you want, like new boots and another glass of Pinot Gris with dinner, and 20% to debts and savings. Of course you can tailor those numbers to your specific needs, but if you’re looking for a basic budget to serve as your foundation in 2019, 50/30/20 is a great place to start.
For those who want an app to help manage it all, there’s a number of great ones featured here.
If building a budget and figuring out the best way to manage your money feels a little overwhelming, don’t worry. You’re not alone. Sometimes the best way to get started is to talk through everything with a real human being. We can help. Download the Umpqua Go-To app to chat from anywhere with your personal Umpqua financial expert. We’ll work with you to set a budget and chart a course that will make this new year a great one.