Among all of the holiday festivities and merrymaking, one of my favorite year-end activities is setting a vision for the one ahead. And I’m not talking about near-term resolutions that I’m bound to let go come February. I’m talking about dreamy, sometimes lofty, lifestyle ideals—the vacation I want to take, the project I want to start up, the time I want to spend away from work, and the new home I want to host my loved ones in. While I might not reach all of these goals this year or next, they will consistently motivate me to make positive choices with my health and my money. Here’s how you can start working to afford your dream life, too.
featured image by Emily Henderson
image by apartment34
Review last year’s money habits.
The problem most people have with their finances is that they are reactive rather than proactive. But in order to be proactive about your financial life, you have to learn from your past experience. Now is the perfect time to reflect on the year and evaluate how you handled your finances. If you use an app to track your spending (Personal Capital is my favorite), this should be easy to do. Otherwise, you may have to pull your monthly bank accounts to jog your memory. When reviewing the year, record your answers to these key questions:
- What are the top ten things you spent money on this year?
- How much money did you make each month compared to how much you spent?
- Did you face any unexpected expenses?
- What were they, and how did you pay for them?
Breaking down your finances this way will open your eyes to money habits you never realized you had. It will also give you the information you need to correct what’s wrong and to sustain what’s right.
image by Brunch on Chestnut
Set specific goals and save towards them.
What are some of the things you want to do in 2020? Take a family vacation? Remodel a room in your house? See your favorite artist in concert? Make a prioritized list of everything you’d like to accomplish next year that will require some saving. Then, start working toward those goals either through separate savings accounts or through an app (I personally love Qapital for this). Qapital lets you set specific, separate goals and customize exactly how you want to save towards them. Maybe you want to round up your everyday purchases to the nearest dollar. Or transfer cash each time you get paid. You could also move cash into savings each time you hit the gym by connecting to your fitness apps. Get creative with it!
image by kate zimmerman-turpin
Stop wasting money on things you don’t value.
As someone who stresses the importance of saving for the future, I still encourage you to approach your finances with balance. The key is to spend money on things and experiences you truly value, and cut out the rest. It’s so easy to fall into bad money habits and never realize you’re wasting money, which leaves less room for the purchases you actually care about. Whether you pay for a magazine subscription you rarely read, a mid-afternoon coffee because you’re bored, a gym membership you hardly use, or avoidable bank fees, cutting off a recurring payment (as small as it may be) can actually go a long way.
image by Cup of Joe
Make sure your savings are making money.
Most people take the path of least resistance when it comes to bank accounts. They generally open a savings account with the same bank that holds their checking. Simple, right? The problem is that large, traditional banks pay an average interest rate of 0.01%. That’s nothing! Meanwhile, smaller online banks like Marcus and Synchrony Bank offer savings accounts with interest rates over 2.0%. Let’s put that into perspective. If you put $10,000 into a traditional bank savings account, you’d earn about $10 in interest over the course of 10 years. If you put that same $10,000 into a Marcus savings account, you’d earn about $2,250 in interest over the same time period! So let your money work for you. That extra cash can get you that much closer to attaining those lifestyle goals.
