Per usual, I can’t quite believe it…We’re a few weeks away from the new year. I love everything about this time – wrapping up a year, reflecting on how things have gone, and setting goals for another year. I think now is the perfect time to get things in order. Don’t wait for a new year to start, start now! This applies to every area of your life, but especially your finances!
If better money management is on your new year’s resolution list, what better time than now to begin? I’m sharing 5 money management systems to put in place before the year ends. Make it a point to implement these money systems in preparation for a new year, so this next year can be your best one yet!
5 Money Management Systems to Put in Place Before the Year Ends
#1 Budgeting System
You’ve heard me say it a million times, so what’s one more?! A budget is the number one tool for financial success! No matter how much or how little a person makes, we all need a budget. Unfortunately, without a budget, you don’t know what should be happening with your money. When you don’t know what your money should be doing, it does whatever it wants…and that’s not a great recipe for money management success!
When it comes to setting up your budgeting system, I want you to think about it as a process from start to finish. The starting point is setting up your budget for the next upcoming month. This is the plan for your money, and a new month is a great starting point. Then, you’ll want to get a picture of what’s happening with your money throughout the month. This is where tracking your spending is critical.
Lastly, you’ll want to know if things went according to plan with your money. At the end of the month, complete a review of your money. Did you stick to the budget? Did unexpected things come up that need to be accounted for next month? Use this time to wrap up your money and budget for the month.
#2 Saving System
If you don’t currently have a savings account or if you have a problem keeping money in savings, you’ll want to set up a saving system. There are 2 ways to approach setting up your savings system: saving when you have debt and saving when you don’t have debt.
Let’s talk about setting up your savings system when you have debt. First, you’ll want to determine an amount to save before aggressively tackling debt. This could be $1000, 1 months’ worth of expenses, or another number that suits your situation.
Once you have that number established, open a high yield savings account that will hold the money you save. Review your budget to see what you can afford to put into this savings account every paycheck (or month) and keep there without touching.
When you have the savings goal number established, reverse-engineer the goal to see how long it will take you to save it. For example, if your goal is to save $1000 and your budget says you can afford to save $250/month, you’ll hit the goal in 4 months.
The steps to saving when you don’t have debt are similar, but the amount changes. If you don’t have debt (or you have paid off all high-interest debt), your goal should be a fully funded emergency fund (ideally 3-6 months’ worth of expenses). Determine your monthly expense number, times it by 3 or 6, and that gives you your goal amount. Review your budget to see what you can afford to save monthly and figure out how long it will take you to reach the goal amount.
Track your progress until you reach your goal, then set a new savings goal and rinse and repeat this process!
#3 Debt Payoff System
At the time of my writing this article, interest rates on debt are incredibly high. If you have credit cards or personal loan debt, you’ll want a system in place to pay it off as quickly (and realistically) as possible. First, you’ll want to organize your debt to get a full picture.
I recommend creating a spreadsheet with columns labeled to track the debt name, type of debt, balance, interest rate, minimum payment and due date. Next, identify which debt will be tackled first – leveraging a debt payoff strategy (like the snowball method) is more effective than putting extra to all debts at the same time.
Next, review your budget to determine how much more than the minimum payments can go towards debt. If the number is small (or non-existent), come up with a plan to make more or spend less so you can pay your debt off faster. Unfortunately, only making minimum payments isn’t going to cut it. You’ll just end up with more to pay off in the long run, because interest rates are so high.
Track your debt pay off progress with a spreadsheet, coloring worksheet or other tracking system. The CGS Debt Reduction Kit can help you get your debt organized and track your payoff progress!
#4 Investing System
When it comes to your investing system, everything should be on autopilot! Let’s break down 2 types of investing systems: one for retirement and the other when you’re debt free.
Your investing system for retirement may already be set up. Most employees are automatically enrolled into their employers’ 401k plans. If you’re not sure, contact HR to confirm. You can also look at your paycheck stub to see if any contributions are being made. Your goal should be to contribute AT LEAST what your employer will match.
Once you get to a good place with your budget, spending and debt, you can work to increase your retirement contribution by up to 10%. The ultimate goal would be to max out every year. In 2024, the annual maximum is $23,000.
Your investing system for when you’re debt free will look a bit different. First, you’ll need to open a brokerage account. Vanguard, Robinhood, Betterment, Schwab and Fidelity are all great options. Then, review your budget to see how much can be safely invested. The goal is to invest money you won’t miss, so make sure you have a solid savings in place before you get started.
Once you know how much you can invest every month, set up auto transfers that purchase exchange-traded funds every time the money hits your brokerage account. This method is called “dollar cost averaging”. The fund I recommend when getting started is SPYG. This particular fund tracks the S&P 500.
Once a year (or even when you review your budget every month), review your investment contribution amount – can you increase the automatic transfer amount? The more you can invest, the more wealth you can build over time.
#5 System for financial growth
The final money management system to put in place before the year ends is a system for financial growth. What is your plan for continuing your financial growth and expanding your financial knowledge? Do you plan to consume content or work with a financial coach?
Books, podcasts, newspapers, and blog articles all provide great insight about financial-related topics. Determine how often you will consume this content and make sure you stay on top of it. If your goal is to work with a financial coach or advisor, get the ball rolling! Determine when you’ll seek the guidance of someone else and reach out to find the right fit for you.
Our financial knowledge and growth should always be happening. That means it’s important to find a system that can help ensure we’re always moving in the right direction. Learn more about my 1-on-1 money coaching program to see if I could be a good fit for you!
Related: 7 Financial Filing Routines to Implement ASAP
No matter where you are in your financial journey, each of these money management systems can have a huge impact on your situation! Set a goal to get these systems set up before the new year, that way you’ll already have a solid routine in place that can be expanded on as the year goes by!
Do you already have some of these money management systems set up? What’s your plan for tweaking or enhancing? Share your thoughts or questions in the Comments section below!
-Raya
The CGS Team
