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3 Useful Financial Habits To Form In 2016

by
Tom Gargiulo, E.A.
on
1/7/2016
3 Useful Financial Habits To Form In 2016

The New Year is traditionally one of opportunities. People use January 1, as a springboard for positive change in their lives. Whether they're trying to lose weight, setting a timetable for job advancement, or are finally trying to get started on that novel they've always wanted to write, there is no better opportunity than the morning after the ball finally drops in Times Square. The New Year is also a great time to reassess your financial activities and form the types of new habits that will carry you into the future. There are a few key positive financial habits that you'll definitely want to form in 2016, for a number of reasons.

Embrace Automation

One of the major stumbling blocks that people see when developing useful financial habits involves the sheer amount of time and energy they take to forge in the first place. Some people look at performing an overhaul of their current financial practices as massively time consuming, compared to the return they're getting, so many of them don't bother in the first place.

Luckily, times have changed and the idea of automation has entered into the financial services world in a big way. Many major financial institutions offer automated savings programs, with Bank of America's "Keep the Change" program being just one prominent example.

With these types of programs, your bank will actually round-up every purchase you make to the nearest dollar. Did you just pay $25.10 to fill up your gas tank at the station? Bank of America will charge you for $26 and put the $0.90 difference into your savings account automatically. Depending on the frequency at which you use your debit card, these small increments can significantly add up over time - creating huge savings without even realizing that you're doing anything at all.

2016 is also a great opportunity to automate your financial life in other ways, too. If you have your own retirement account, you can work with your bank to schedule automatic contributions to hit every time you get paid. Not only is it much easier than performing everything manually, it also makes the age-old concept of "out of sight, out of mind" work to your advantage. If you're less involved with saving, you're less likely to spend that money when you really shouldn't be.

Look Backward to Move Forward

Perhaps the biggest useful financial habit to form in 2016, involves using the beginning of every year to take a look at how far you've come in regard to where you were hoping to end up. A solid plan only works if it's malleable - you need to have the flexibility to change when necessary, or when bigger and better opportunities arise. If you fall into the trap of doing things one way because "that's what has worked in the past," you're less likely to pivot in new directions when necessary or to identify certain problems that you may be essentially ignoring.

Start a new year by reevaluating your financial priorities. How much progress did you make in the previous 365 days? Is your ultimate financial goal still what you thought it was a year ago? Maybe in January 2015 you thought you really wanted to buy a house, but in January 2016, you realize that this might not fit in with the lifestyle you're trying to lead. Looking backward is a great way to help outline the best course of action to take moving forward, or even switch to a completely new plan if that is now more to your liking.

Your Smartphone is Smarter Than You Think

It cannot be overstated enough: tracking your expenses is one of the best financial habits to get into for a wide range of different reasons. If you always know how much money is in your bank account you're not only less likely to overspend in general, but you're also more likely to recognize purchases that may be more superfluous than you thought they were when they presented themselves. In the past people used paper check registers, but in addition to being out-of-date it's also more work than many are willing to put into the practice in the first place.

Luckily, 64 percent of people in the United States are already carrying something better and more powerful than a checkbook with them in their pockets at all times - their smartphones.

Most major banks have iOS, Android, and similar apps, designed to give you an up-to-the-minute account of your banking activity from a device small enough to fit in the palm of your hand. Even if you don't want to manage multiple apps for different providers, you can still find software, very inexpensively, that will mimic the functionality of a paper checkbook in a significantly easier and more convenient way. Just enter your starting balance and make a note of every transaction you make - the total amount of money you have in a particular account will automatically adjust, taking math completely out of the equation.

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Tom Gargiulo, E.A.

Tom Gargiulo, E.A.

Tom Gargiulo, E.A. is a tand Quickbooks accounting professional based in St. Petersburg, Florida. Tom is a Member of the National Society of Tax Professionals and has been Enrolled to Practice before I.R.S. since 1986. Specializing in Quickbooks Accounting, Consulting and Training, he has many QuickBooks certifications. National Tax, Accounting & Financial is a family business started over 25 years ago. If you could summarize our firm in one word, it would be "personalization". Our firm gets to know our clients as people and uses our personalized service to best meet their needs in all facets of our business. This translates into savings for our clients. We bring unique solutions to complex problems by applying years of experience and the latest technologies. We can assist you with your tax preparation and accounting needs.

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