Three Steps to Take Control of Your Finances This Year

The New Year is always a popular time to make resolutions and with the current state of the economy, resolving to improve personal finances is always an important aspect of your life to examine. But you don't need the turning of a calendar to start yourself on the path to financial independence, get out of debt, or generally get yourself into better fiscal shape, that can be done at anytime. Let's look at three steps you can take anytime to rein in spending, increase savings, and improve your financial status.

Live below your means. What does this mean? Don't live an upper class lifestyle on a middle class income, or simply put, don't spend more money than you make. As always, this is easier said than done. With widespread use of credit cards, "shopping therapy", keeping up with the Joneses', and constant bombardment by advertising, it can be difficult to resist the urge to purchase stuff, spend money, and buy things, but resist you must. Spending more money than you make is the shortest path to financial ruin.

Kill that credit card. Do whatever it takes to remove the temptation to use your credit card, especially for discretionary purchases. Take the card out of your wallet, put it in the freezer, cut it up, or give it to a friend or family member for safekeeping (though think twice about cancelling the account, which can have negative impacts on your credit report). If you're already in debt, stop using that credit card and making that debt larger, and make every effort to pay off the full balance. Again, it won't be easy and may take months or even years, but few things that are worthwhile are ever easy.

Establish an emergency fund. Sure it would be great to have six months of living expenses on standby, but for many people that just isn't practical. But do whatever it takes to have some money ready in a savings account, under the mattress, or in a money market fund for use during an emergency. $500 dollars is a great target to shoot for, $1,000 would be even better. You never know when a car repair, doctor visit, or job loss is going to happen, and having an emergency fund can prevent charges from piling up on the credit card. Like most people, I don't have $1,000 to spare to start an emergency fund, but I do set aside few dollars every week toward establishing that cash reserve so I have some money in an emergency and don't need to use that credit card.

These are just three suggestions to help get your finances under control. If you can live below your means, stop using your credit card, and establish some kind of emergency fund (no matter how small), you'll be headed in the right direction. There are also many other steps you can take to reduce your debt, increase your savings, and get back on track, and you don't need the New Year in order to make these changes, you can implement them at any time.