Budgeting Tips to Help Fix a Holiday Spending Hangover

As the first month of the new year, January arrives with a timely opportunity to reflect on the past and prepare for the future. You might join the resolution crowd at your local gym, exercising more and snacking less to work off the holiday culinary indulgence. Spending also peaks for many people around the holidays, making January a great time to get your budget back on track in similar fashion.

“At a minimum, give your personal finances a yearly checkup,” said Joe Correnti, senior vice president of brokerage product. “You have to save before you can invest, and reviewing your budget helps you see if your daily expenses align with your future goals.”

Here are some starting points.

Eliminate Bad Debt

Going through life truly debt-free is a lofty aspiration, but unrealistic for most people juggling a combination of mortgage, auto and student loans. However, if you’re still paying the bills from more carefree days, focus on that high-interest debt first. The compounding interest can dramatically reduce the amount you can save.

Pay Yourself First

No matter what you’re saving for, consider funding it through the consistency of ongoing automatic contributions. Your employer may offer matching funds for retirement and healthcare accounts as further incentive.

And if you get a raise, don’t forget to give your savings a raise as well. Increasing the amount you contribute to your IRA or employer-sponsored retirement plan can have a big impact on your nest egg down the road. By paying yourself first, you guarantee that you won’t leave any match money on the table.

Track Your Spending

Whether you’re a fan of software, spreadsheets or pen and paper, document the contributions suggested above as the first entry in your monthly expense report. At first, you may be surprised at the difference between where you think your money goes compared to where you actually spend it. Once you have the numbers, you can identify areas for improvement.

Next-Best Dollar

You should consider regularly reviewing and prioritizing your savings goals. Depending on your goals, there may be tax-advantaged accounts to help you save for them. The following accounts are commonly used by investors for specific circumstances:

  • Retirement – Individual Retirement Account (IRA)
    • Traditional IRA
    • Roth IRA
  • Healthcare
    • Health Savings Account (HSA)
    • Flexible Spending Account (FSA)
  • Education
    • Coverdell Education Savings Account (ESA)
    • 529 Plan

    Balance Your Budget

    Knowing how much – and how long – you need to save for tomorrow allows you to prioritize your spending today. Like any fitness regimen, it takes practice and discipline to stick to your financial strategy. Even small, routine purchases can make a big difference. Staying focused on your big picture will help reduce the temptation to splurge and catch up later. Your future self will probably thank you for it later.

    “For investment-minded savers, reaching your goals amounts to time in – not timing – the market,” said Correnti. “Once you identify those goals, you can build a long-term plan and make steady progress toward it.”

    Read More: Learn how saving even a little more can have a big impact on your retirement picture.

The content provided is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product, or an endorsement or affirmation of any specific investment strategy. You are fully responsible for your investment decisions. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances, and your investment objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice, opinion or recommendation of the suitability, value or profitability of any particular investment or investment strategy.

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