Tips for effective money management and saving in the new year

Let’s get straight to the point: Saving is hard and for some may even seem impossible. Still, the new year presents an opportunity for a new mindset, so let’s consider a few ways to more effectively manage our money starting this year and moving forward.

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Set savings goals

Having a clear goal in mind will help you save by warding off impulse purchases and other temptations. Attaching reasons to your goals can put them in perspective and fuel motivation. For example, two common goals are building up an emergency fund so you can afford housing if you lose your job, and getting rid of credit card debt so you don’t waste money on interest payments.

Once you set goals, you can prioritize which ones to tackle first. Your goals are likely to have the biggest impact on how you allocate your savings. For example, a common budgeting question is whether to pay down debt, save or invest.

Create a budget

For most, this goes without saying: About 75% of Americans report having a budget. But not having one is at the root of financial issues and stresses. If you find yourself here, make it a top priority this year to create your household budget.

This will allow you to better anticipate expenses, manage debts, and make effective savings plans. A budget is the foundation to your financial goals. If you don’t know where to start, use online resources to find budgeting strategies and tools that work best for you.

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While budgeting apps and software are popular, you don’t need anything more than a pen and some paper to write a budget. The most effective budgeting tool is the one you’ll actually use. The basic budgeting process involves writing down expenses, from monthly bills to small discretionary purchases, such as morning coffee or lunches, and then categorizing those based on whether they are needs or wants. 

Next, add up your income. Plan to pay your needs first; you can spend leftover money on wants. If your expenses exceed your income, you’ll need to determine what changes to make. You may be able to balance your budget by cutting out wants.

Manage subscriptions

Did you know that most people are paying between $100 to $200 more than they know on monthly subscriptions? Though it may seem a little tedious, carve out some time to actually see what subscriptions you are paying for and what time of month these payments are deducted.

You can then determine if you need all of your subscriptions, if some need to be cancelled, or if you are paying for duplicates. It’s very likely you will be able to access additional money you didn’t know you had. You can do all of this manually by tracking expenses in your bank account and then canceling subscriptions with each vendor. There are several apps and other online resources that will automate this process.

“If you can’t buy it twice, you can’t afford it”

It is so easy to make emotional impromptu purchases. According to the Neilson report, African Americans are 20% more likely than the total population to say they are willing to “pay extra for a product that is consistent with the image I want to convey.” 

Overspending, however, often can be better managed. When tempted by a nonessential purchase, wait a few days. You may realize the item was something you wanted rather than needed — and you can develop a plan to save for it.

Ruling out all discretionary spending may not be the answer, but being mindful of this rule of thumb is a simple way to determine whether a purchasing decision is truly worth it. Furthermore, every dollar you don’t spend is a dollar you can save.

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Automate your savings

Sometimes the best way to save money is to not see it in the first place. For many of us, we are comfortable spending what we have, even when that amount is more than we actually need to spend. One great way to save money is to automate your savings. 

Almost all banks offer automated transfers between checking and savings accounts. You can choose when, how much and where to transfer money, or even split your direct deposit so that a portion of every paycheck goes directly into your savings account. The advantage: You don’t have to think about it, and you’re less likely to spend the money instead. 

Don’t make this a crippling amount; the important thing is that it will be put away, and it will be growing. Start with a small amount like $20, and increase this amount later if you feel comfortable. Even if you save $20 every other week, you will end up with more than $500 in savings in a year.

Educate yourself

While putting money away is the ultimate goal, being knowledgeable about the strategies and tools that help build financial literacy is also important. Most banks also offer free resources to help their customers save. Check out what is available. Social media and online tools also can connect you to powerful resources that can fuel your journey to financial wellness.

If saving doesn’t seem realistic right now, especially after the holidays, you can still start putting plans in place for how and when you will institute your new savings plans. It’s never too early to start.

Tiffany Johnson is a marketer, writer and musician in the Twin Cities. She is an MBA student at the University of Minnesota Carlson School of Management. She received her BA in English with a minor in African American Studies from the University of Minnesota.

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