How to Stop Making the Same Money Mistakes This Year

When we come to the end of a calendar or fiscal year, or start gathering the paperwork we need to file tax returns, we may think back on our financial decisions of the past 12 months.  Or we may have this internal heart-to-heart as each bank statement or credit card bill arrives in the mail.

For many of us, these thoughts bring regret.  Maybe we're unhappy about overspending, missed savings opportunities, or major expenditures that now seem unwise.  Maybe our level of debt causes anxiety or shame.  In spite of our intentions and resolutions, we may wonder how we let ourselves make these terrible choices yet again.

tax time

Don't follow this trend.

If you're in this situation, you're not alone.  The average American family added 14% more credit card debt in 2022, and even more in 2023.  Auto and personal loan balances are up, and Experian reports that mortgage debt has seen record growth.  Millions of Americans spend more than they earn every month, the exact opposite of financial health.

When the Joneses spend more than they earn and save less than they need, keeping up with them is a really bad idea.

This realization is the first, essential step toward making positive changes in your financial life.  Keep going with the following effective strategies.

10 tips to improve your financial situation this year

1.  Admit it.

Acknowledge where you went wrong, but don't condemn.  Name calling and endless regret won't help, but noticing your pitfalls will.  Are you an impulsive shopper?  Have you failed to make savings a priority?  Is your record-keeping sloppy, resulting in late fees and overdrafts?  Understanding your weaknesses is the best way to overcome them.

2.  Be specific.

Vague resolutions like "spend less" usually fail.  Whether you decide to pay off a certain amount of debt, save a particular sum, or cut spending in one category by a definite percentage, set a specific, achievable money goal and you'll be more likely to reach it.

3.  Stick to a budget.

Does the idea of a budget seem restrictive, boring, and old fashioned?  Believe it or not, "budget" is not a dirty word, and a budget isn't an outdated idea, but a useful tool for today.

The process of making a budget helps us focus on our needs, but it also lets us find a way to afford our desires.  A budget gives us control over where our money goes.  There are many apps that make the process easy, or you can try my simple 8-step plan.

4.  Build emergency savings.

With an emergency fund, you'll have one less source of stress when your car suddenly needs a new alternator, your refrigerator unexpectedly dies, or your child needs a trip to the emergency room.  If you have debt, an emergency fund can help you avoid borrowing more.

Of course, an emergency fund won't happen overnight.  But you can start today to implement one or more savings strategies.

5.  Make saving a priority.

Watching your savings grow won't just increase your peace of mind, it will help curb your desire to shop for things you don't need.  Use these strategies:

  • Save a portion of every paycheck, even if it's small.
  • Decide to save a percentage of every windfall.
  • Pay yourself first by setting up an automatic transfer into your savings account every payday.
  • Pay with cash instead of a card, and put any coins in a jar.  I save over $40 a month this way.

6.  Plan to tackle debt.

If debt is holding your future hostage, don't despair.  It may seem impossible, but you can get free.  Here's my plan to destroy debt.

7.  Curb the impulse.

Impulse buys will derail any budget, so implement a waiting period.  Notice what you see and want to buy and tell yourself that if you still want it in three days you can come back and buy it guilt-free.  Do you even remember it three days later?  Or does your sudden "need" fade away?

8.  Consider adding income.

Decide if you want to enhance your savings or debt repayment goals by increasing income.  You could take on a side hustle, do freelance work, or even sell items you no longer need.

Remember that more work hours mean less free time.  Will you be less likely to cook and do other home chores, or more tempted to indulge in extra purchases?  If so, cutting non-essential costs may be a better option to meet your needs.  Only you can decide if more work will actually help you or not.

9.  Veto lifestyle inflation.

This is the tendency we all have to increase our spending when income rises.  When we do this, it remains impossible to get out of debt, save, invest, or consider retirement.  It forces us to keep working just to pay the bills.  Don't justify lifestyle inflation with "I work hard, so I deserve this."  What you deserve is less stress, less debt, and more financial security.

10.  Practice gratitude.

Gratitude will shift your focus from what you lack and want to buy to the many blessings you already have.  It's necessary for contentment, and a surefire way to get your spending under control.

One more thing

Very few people can claim perfection in the area of finances.  Perhaps our relationship to money is the true test of our character.  That said, it's important to forgive yourself for past mistakes.  Financial health is a journey of small, consistent steps, and it's never too late to begin with new determination and purpose.  Here's to a year of better choices!

Physical clutter can be obvious:  that unused treadmill, those stacked up boxes, or the pile of knickknacks, mail, and remotes on the coffee table.  But financial clutter, such as debt, overspending, and a fuzzy understanding of what you owe and where your money goes can be much less apparent.

Minimalism doesn't mean lack and deprivation.  Minimalism is a tool that can help us find happiness by steering us in the direction of what we truly desire.  As we let go of financial clutter, we have more resources to accomplish the things we really care about.

  • discover your money beliefs and how they influence your financial decisions
  • buy less and demolish debt
  • make a budget that lets you focus on your needs and find a way to afford your desires
  • feel empowered, not poor, as you control your spending
  • increase enjoyment and satisfaction without spending money
  • and more!

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