With 2016 just around the corner, it’s a good time to start setting a few money-related goals. If that sounds like the last thing you want to do, remember that you don’t need to reach for the stars. A few minor tweaks here and there are often all it takes to get into better financial shape.
Set a budget and stick to it
Living within your means is one of the toughest habits to master, but it’s also one of the most important. Setting a budget should make the process much more manageable.
Review your expenses from the past few months and separate them into two categories: essential and nonessential items. Essential spending includes items such as rent and groceries. Movie tickets, meals out, and other entertainment-related expenditures would fall into the nonessential category.
Although you likely can’t reduce your rent payments, you can make some cuts in your nonessential spending. Check to see which categories you feel you are overspending in, and set a monthly spending limit for them.
Keep debt to a minimum
Young consumers have the lowest average credit score of all age groups, according to NerdWallet’s research on millennial credit scores. Using a credit card responsibly is an easy way to build your credit history.
So what does responsible credit card use look like? Generally speaking, you should only whip out your plastic for purchases that you know you can afford. Even if your card has a monthly limit of $1,000, don’t charge more than $300 on it. Spending less than 30% of your monthly limit is not only what’s best for your credit score, but will also help you avoid drowning in debt.
Contribute to retirement accounts
As far off as retirement may seem, start preparing for it now. That means putting away at least 10% of your monthly income into either a 401(k) plan or individual retirement account (IRA), which you can get at a financial institution like Camino Federal Credit Union. You should aim to work your way up to saving 20% of your income.
Funds in these accounts will grow tax-deferred thanks to compound interest, which is the gradual increase in the amount of interest you earn over time. This means that a dollar saved and invested today will be worth much more by the time you retire.
The takeaway
From setting a budget to stashing away cash for your golden years, making smart money moves doesn’t always entail tons of work. It’s a good idea to make managing your personal finances a part of your weekly routine. If, for example, you see that you’re overstepping your spending limit, you’ll be able to adjust your budget before it does too much damage to your checking account. These types of tweaks will ensure that you stay in good financial shape in 2016 and beyond.
Tony Armstrong, NerdWallet
© Copyright 2015 NerdWallet, Inc. All Rights Reserved