Yen & You is a recurring feature written by Austin Morgan, a JET in Fukui Prefecture. Austin enjoys warm weather, playing guitar, and blogging about personal finance. Check out his blog, Foreigner’s Finances, for more personal finance insight for twenty-somethings.
Studies show that 97 percent of New Year’s resolutions don’t last.
Don’t let this discourage you from goal setting.
I’m not a fan of perfectionism so I think starting and exploring a new year’s resolution is better than sitting on the sideline and hoping your problems magically fix themselves.
Money resolutions are popular every year, so what can you do to make sure your money is working for you in 2010?
- Pay off any consumer debt
If you have consumer debt on cards with interest rates around 20 percent, your finances will forever dominate you.
Need proof? If you have $3,000 of credit card debt and you only pay the minimum payment every month, it will take you 26 years to pay off and it will cost you almost $8,000 in interest alone!
Need more proof? Check out my appropriately named post at my blog: Credit Card Debt Facts That Will Scare You Into Staying Out of Debt for Life.
Once you pay off your consumer debt, you’ll gain momentum and saving will become much easier.
Create a savings goal
Far too often we go through the year saying, “I wish I could save more” or “Maybe next year I’ll save more” but we never do. This is because we never take the 10 minutes to sit down and set any savings goals.
What amount of money would you like to have in you bank account in December of 2010 that would make you proud of your year? You have to be realistic and consider your salary, your expenses, student loans, travel, etc., but truly think about it.
Without a specific number goal in mind, you’ll blindly move from paycheck to paycheck wondering why you can never save.
A good trick I learned to promote saving is to think about five years from now. Where do you want to be? What will your job be? Where will you live? What will your big expenses be? These thoughts may be a little overwhelming, but they’ll show you what truly matters and you’ll be able to start saving immediately because of them.
Save every month
Once you have your money goals, the simplest way to save is to put aside a specific amount every month and don’t touch it. For my first Wide Island View post, I talked about creating spending barriers to save.
If you want to make saving even more simple, decide how much you’d like to save for the year – start with 20 percent of your salary – divide it by 12, and every month you get paid take out a month’s worth of savings and put it in a safe place in your apartment.
Don’t touch the money and continue with your monthly savings withdrawals. At the end of the year, you’ll have 12 months of savings and you’ll have met your goal.
If you have trouble saving, it’s so important to keep it simple because as soon as it gets too complex, you’ll stray from your goals and you’ll wind up back in bad money habits.
There will never be a better time to save than when you’re in your twenties and working a decently paying job with no dependents. Take advantage of your fortunate money situation today so you can coast with your money later on.