SAVANNAH, Ga. (WTOC) -Improving finances is one of the most popular New Year’s resolutions year after year. The Morning Break team spoke to an assistant professor of finance at Georgia Southern about how to turn that resolution into reality.
Doctor Katie Pham says it’s crucial that you choose a specific financial goal to pursue. Based on her experience, Pham says reducing spending, increasing savings, and investing earlier are all goals most people could benefit from.
She says the first step to cutting down on spending is gaining a detailed understanding of what you spend money on, as well as when and where you spend it.
“Simply go onto a credit card website that you use. Log in. Download all the transactions. Three months, five months, six months worth of transactions, and the credit card companies are making things easy by breaking down categories of spending. So you can really kind of analyze that spending.”
Then, start small and take a look at what daily or monthly habits you can cut back on or find alternatives for.
“I had a friend of mine that said, ‘I cannot live without a cup of Starbucks every day,’ and I’m like, ‘Ok, a cup of Starbucks every day, that will add up right?’” Pham said. “All the little things add up.”
If you want to target your savings this year, the easiest way to start is to set up an automatic transfer. Pham says don’t be embarrassed to start small. Instead, just focus on what you can afford to save. Then, check in once a month to see if you can afford to start saving more.
“Even though this month I can only save 100, right, dollars, and if you are constantly looking into that, right, how much I can save, if you do that next month you can increase it to $200, in three months you can increase it to $500.”
With both saving and investing, Doctor Pham says the focus should be on doing so consistently. She says a common misconception is that you need an investment professional or a lot of free money to start. Also, don’t think an investment has to have high returns to be worth your time and money.
“We always think I need to make an investment, if it doesn’t return 20% or 30% that isn’t worth it. No. That’s not it. If you can make a stable investment, even though the interest rate is probably 9 or 10 percent over the year, but if you take that stable interest rate and extend it over time, and you’re saving, your wealth accumulated fast over that period. So the younger or the earlier you start, the more time you have to accumulate that wealth.”
Doctor Pham says it’s important to recognize that saving for retirement or for your child’s college education also counts as “investment.” She says make sure you fully understand company resources that are available for you there.