Improve Your Financial Life With Five Daily Actions

The year is drawing to a close, and soon people will be scrambling to declare resolutions for the New Year.  I am no exception.  In years past I have identified two or three things I would like to improve on, but usually burn out by March. The goals probably sound familiar:  lose 50 pounds, become debt free, write a book, save $5,000 in my emergency fund at ING Direct, etc.

This year I am taking a new approach, and rather than declaring New Year’s resolutions I will simply identify five things that I want to do every single day to improve my financial life.  They aren’t huge, life-changing habits, but together they represent examples of the kind of daily discipline it takes to turn my financial ship around and stay on course next year.

1. Maintain a spending journal. Journaling is a great way to introduce accountability into your life.  Whether it is dollars or calories, keeping a journal of expenditures provides a way to keep track of your daily outgo.  It also helps you identify trends that may be valuable in creating next month’s budget, or help in reducing a particular budget category. Write down all of your expenses in the journal and give them a category (housing, food, clothing, school expenses, gifts, etc.). At the end of the month group these expenses together.  You might be surprised to learn you spend $200 eating lunch out with coworkers every day, or $2.00 a day at the vending machine.

2. Develop a passive income. Developing a passive income is one of the keys to building wealth because it puts your money to work even when you are not. Passive income may be derived from things like interest accumulation, royalties, rent from real estate holdings (although landlords would argue this isn’t exactly a passive activity), social lending, or you can get close to passive income with activities such as blogging, or selling e-book products online. Even if you only make two or three dollars a day, that is $60-$90 per month that you would not have earned otherwise.

3. Make micropayments on outstanding debts. Many people are now familiar with the concept of snowflaking–collecting small amounts of “found” money and pooling it for a purpose such as savings, paying off credit cards, etc.  Well, I like to take that same method and apply it to debt reduction.  I call it “snowballing,” after the other popular personal finance concept, the debt snowball.  Using any extra money I can squeeze out of my budget, or from passive income, I make small payments throughout the month on outstanding debts. If I left the amount sitting idle in my checking account chances are I would spend it before it was applied to debt.

4. Update your budget. At risk of seeming obsessive, I like to update my budget every single day.  I wake up early, and part of my routine is to review my checking account from the day before and mark cleared items in my checkbook.  I then subtract any outstanding credits, and add back any outstanding debits, to balance my paper register with the online system’s current available balance.  Like I said, it may seem a little excessive, but after going weeks without balancing my checkbook register I found this daily action helps keep financial stress away because I always know exactly where I stand.

5. Read something educational every day. I start my day off reading posts from about twenty-five of my favorite blogs. Then I check the news headlines online before moving onto a magazine article or book chapter I’ve bookmarked the night before. Throughout my day I try to carve out time to read some of the newspaper for local happenings, and usually wind up my day reading more from a book.  I had a goal of reading a non-fiction book every week, but quickly burned out thanks to my hectic schedule.  Perhaps a book every other week is a more feasible goal for this year.  Either way, the idea is to read something educational every single day. And if you can sneak in something finance related, even better.

I have discovered the hard way over the years that success usually comes to those that win the daily battles. You might have noble goals such as to lose 50 pounds in 12 weeks, or pay off 50% of your debt in six months.  However, if you don’t win the daily battles you will not reach those long-term goals. Identify some daily actions to take in your own life to improve your finances before setting those long-term resolutions for the New Year.

Comments

  1. These are good tips. They are more attainable than the illusive 50 lb. weight loss. The other bonus is that if you get off track for a week you can just pick right back up again and your goal hasn’t been missed for the year.

  2. My New Year’s Resolution last year, and one I will continue with this year, is to end the year with less stuff than I started with. It’s worked so far for me, and of course, there is still more to go.

    It helps me not bring more things into my house and find ways of getting rid of what I already have, what is unused, what someone else might want, or what is taking up space.

  3. Instead of a journal, I update my financial software on a daily basis.
    I also reconcile all my bank accounts (using the software) and always know what’s outstanding or what’s coming up.
    I try to use cash as little as possible because it’s so hard to lose track. Most things go on my credit card (it’s a cashback card) which I pay off each month.
    The biggest challenge for me is the passive income – it takes a lot of work to get it going, so, it’s not really passive, initially.

  4. It’s reassuring to know I am not the only one who likes to reconcile my bank accounts and re-visit our budget on a daily basis. I don’t feel so self-conscious about it now. :)

  5. That’s not fair FrugalDad, you just listed five things that you’re already doing. You have to come up with new things for the coming year!

    I agree with you on the small changes and do many of those things myself already. I would say something about the weight loss part though. If you make a more realistic goal, say 1-2 pounds per week, you’ll find that it helps you to stay on track. You will be even more surprised when 12-16 weeks have passed and you’ve lost 20-35 pounds without even noticing. Putting a huge goal in front of yourself is just setting yourself up for failure — kind of like attempting to run a marathon when you can barely do 7 miles a week.

    By the way, how is your diet plan going so far? I know you fell off the wagon with your mom’s illness but you didn’t undo ALL the work you’ve done, have you?

  6. @DavidK: I’ve hit a plateau with weight-loss, mainly because my schedule doesn’t leave enough room for a good workout. It’s no excuse not to eat cleaner, but I seem to be the type that needs exercise to stay on track with nutrition.

    True, these are five things I’m already doing (well, except the reading a book every other week), but still lots of room for improvement.

    Stay tuned…I have a “2009 Goals” post in the works!

  7. With snow flaking i prefer to save it all up then spend it on chocolate lol. I have started to keep a diary of what I spend and when and it has come in very useful and helps make sure i don’t overspend. I find the biggest waste of money is grabbing a sandwich on the go, think i should start getting up earlier to make a packed lunch!

  8. @Leslie: That is certainly an option, and something I have tried with a few of my debts in the debt snowball. Of course, you’ll pay a little more in interest over time because the interest on things like credit cards is probably higher than the savings account. Still, psychologically it is nice to have that extra cushion and then kill off all the debt is one swoop.

  9. I think one also needs to think about how improving your financial life can help you get to some goal in the future.

    I’ve always thought that getting on the right financial track has to have some real motivation behind it (I, for example, stick with my financial goals not because I love the idea of multiple streams of income (or passive income) but rather because I want financial security in the future). The little steps are critical for the right financial track, but it’s the big goals that will keep you motivated!

    Scordo.com

  10. You’re right, you need to win the daily battles to win the long-standing war. I have myself a long standing goal of retiring at 40 but each and every day I know I am that little bit closer.

    Here’s an interesting touch though. Since I started sorting out my finances three months ago, I have been eating healthier, spending less, exercising more and yesterday I’d realised I’d lost 5kg! Hadn’t weighed myself in all that time … that was a pretty bonus :-)

  11. Having passive income is something I would love to have, although not as easy to began making. I agree a few dollars a day adds up at the end of the month.

    I like your tip about reading something educational. I have begun doing that and through the blogs, books, etc, find people like myself in similar situations. From there I learn how they handle things and helps me with my situations.

  12. I’m the same, budget/savings is going much better than the diet, unfortunatly as you get older you have to eat even less to avoid gaining wieght much less losing it.

    I switched from a computer program to a notepad and I find it much easier to track everything, simple write it down and add it up.

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