Holidays, sales and year-end plans can leave your bank account feeling a bit battered. A fresh start, whether it is January or just the first of the month, is a good moment to change your spending habits and get smarter with money. If you are not sure where to begin, here are 10 steps that will help you take control of your personal finances.
1. Track your money
You need to know how much you spend each month and what you spend it on. Only then can you see how much is left to save or invest. A habit of logging expenses every day, in a notebook or a budgeting app, gives you a much better grip on where your money goes.
2. Don’t buy things you don’t need
The easiest way to save money is to stop buying stuff you don’t need. That can be hard when deals pop up from every corner. But you can do it! Think twice before you buy anything, and try a challenge: no new clothes, home decor, cosmetics or electronics for at least one month.
3. Bring lunch to work
Save money by cooking and bringing your own lunch. Make a larger dinner and pack the leftovers for the next day. Your bank account will thank you later.
4. Create an emergency fund
If you don’t have an emergency fund yet, start one as soon as you can, because something can always go wrong.
Personal finance experts commonly recommend saving 3 to 6 months’ worth of living expenses for emergencies, such as losing your job or a sudden car repair. Having that cushion makes life a lot less stressful. Read more in our emergency fund guide.
5. Save at least 10% of your income
Once your emergency fund is in place, start saving for other things, like a summer vacation, a new car or a new phone. Set aside a fixed percentage of your income and move it to a savings account. Many banks let you create separate savings pots so you can watch each one fill up. To see what steady saving adds up to over time, try our savings calculator.
6. Transfer money automatically
To make saving effortless, automate it. Set up a standing order in your online banking that moves money to your savings account right after payday. Some banks and apps also offer round-ups, which save your spare change every time you pay by card.
7. Educate yourself
It’s never too late to learn more about personal finance. Podcasts are an easy way to start. Here are two long-running favorites:
So Money with Farnoosh Torabi
Money inspiration from business minds, authors and Farnoosh herself, plus listener questions answered on air.
The Ramsey Show
Callers get straightforward advice on getting out of debt, saving money and building a calmer financial life.
8. Set SMART financial goals
SMART goals help you define what you want and make sure you can actually get there. SMART stands for specific, measurable, achievable, realistic and time-bound. Instead of a vague goal like “I want to save money”, define each part. For example: “I want a cushion for unexpected situations. Within 12 months, I will have 3 months of expenses in my emergency fund. To get there, I will spend no more than $100 a month on entertainment and $100 on eating out.”
A budget helps you stick to limits like these. In Spendee you can set one total monthly budget and split it into category budgets, so you see right away when entertainment or eating out gets close to its limit.
9. Get the best savings and checking account
Do you still remember why you chose your current bank? Are you sure no other bank offers better conditions? It is worth checking now and then. Compare fees and savings interest rates, ask friends what they use, and switch if you find a better deal.
10. Build a second income
If you want to earn more, focus on your income too. First, ask about a raise or promotion at your current job and talk to your manager about improving your skills. Then consider a side hustle, a part-time job or investing for passive income over time. It is safer not to rely on a single source of income. Our article on extra sources of income has ideas to get you started.