To improve your finances in the new year, wealth-management advisor Tom Nihoul urges you to study what’s coming in and going out of your bank accounts.
“Get three months’ worth of data. Lay it out. You’re going to find you don’t know what you spend,” said Nihoul.
You also are advised to closely look at your debts.
“Lets say they have three credit cards. Pay the minimum on two of them. Take all that money you were paying and focus it on one of the credit cards. Once you get rid of that, take half of what you were paying, put it in cash reserves, then put all that to pay off your next one until you’ve gotten rid of your debt. That way, once you’ve paid off all your debt, you can start living on cash reserves. If you just pay the minimum credit card payment, with 19-20% interest, it will take you 30 years to pay it off,” said Nihoul.
People buying too much of a house is another common observation.
“Maybe they want it; but don’t need it. Start with a smaller house. The problem I see is that people want a big house, a jet ski, a golf cart and to do all of these different things. That’s what they want to do. Put those off. Put those aside until you can afford them,” said Nihoul.
General financial guidelines include having three to six months of cash reserves and using 70% of your monthly income on living expenses. You’re encouraged to put 20% in savings and to give 10% to charity.