How to Get Back on Track Financially in the New Year

1. Get Organized

Organizing your finances is your first step toward getting back on track in the new year. Knowing where your money is and what balances you're carrying can help you make a game plan. Get organized by doing the following:

• Calculate your net worth. This will allow you to have a fuller picture of your debts and assets.
• Review your outstanding debts. You can get a free credit report to see all of your accounts, or check your current account balances online. Note your balances, interest rates and monthly payments, as well as which bills have autopay and which you pay manually.
• Check your bank account balances. Review how much you have in your checking and savings accounts and whether you're on track to meet any savings goals you may have. Note how much you put into savings each month and whether you do so automatically or manually.

2. Refocus on Debt Payoff

This might be especially relevant if you added to your credit card balances over the holidays. If you have no debt to pay off, of course, congratulate yourself and move on. But if you're like most people, you probably have a pile of debt you'd like to shrink. Fortunately, there are a lot of ways to kill off debt. Some strategies you may want to try include:

• The avalanche method, which focuses on paying off debts with the highest interest rates first.
• The debt snowball method, which has you pay off the smallest debts first.
• Consolidating debt into one loan. This can be a good idea for people who have good credit and thus can get a low-interest debt consolidation loan. If you can use a loan with favorable terms to pay off higher-interest debts like credit cards, you could save money and have a set payoff schedule and fixed monthly payment, which can help with budgeting.

Some debt can be unavoidable. Nobody would suggest you don't take out a loan for a house or car, for instance, just to avoid taking on debt. But other debts you want to try and kill off as fast as possible, like credit card debt.

Many personal finance experts recommend using the 50/30/20 rule, where 20% of your income goes toward paying off debt and building up savings. Ideally, as you get your debt under control, you'll put most of that 20% of your income toward savings and retirement investments.

3. Fine-Tune Your Budget

If you are carrying a large amount of debt, or you feel like you're always lurching from paycheck to paycheck, barely able to make ends meet, your budget probably needs to be overhauled or finessed. Rethink how much you're allocating money toward discretionary spending, savings and the like.

Some of the strategies that can help with fine-tuning a budget include:

• Tracking your spending: That can involve using budgeting apps or regularly checking your bank accounts and credit cards. How you track your spending is less important than making sure you do it. It's hard to know you're overspending if you aren't monitoring your finances.
• Improving how you pay your bills and make purchases: This can include automating bill payments so you're never late. Or you might want to go old school with envelope budgeting, which involves setting aside monthly amounts for discretionary or variable expenses, such as groceries, entertainment and personal care. The idea is that if you can see the money there in an envelope and know that's all you have for your pay period to spend on a certain category, you'll be less likely to overspend.
• Reducing spending: You could reduce your spending, until you get your budget under control, by trying a no-spend challenge.

As you can see, there are a lot of different ways to fine-tune a budget. There is no one right way to go about doing it. Often, success with getting your finances back on track partly depends on finding a budget strategy that fits your spending personality.

4. Set Savings Goals

The reason you got off track in the first place may have been due to not having enough money saved up for financial emergencies or large expenses. To remedy that, put some money aside for the following:

• Emergency fund: There are a lot of ways to create an emergency fund, but one of the best is to have part of each paycheck automatically deposited into a high-yield savings account. That way when a financial surprise occurs, you'll be able to pull from your emergency savings and not resort to more expensive options, like using a credit card.
• Sinking fund: In a nutshell, this is putting money aside every month toward a financial goal, such as a home improvement or a vacation.
• Retirement savings: Many experts suggest putting 15% of your pretax income each year toward retirement; if you can't swing that right now, anything saved is better than nothing.
• Your child's education: If you're getting back on track financially in the new year and you have children, consider opening a 529 plan, or adding more to it. Once you put money in these saving-for-college plans, it benefits from compound interest and can be withdrawn tax-free, as long as the money is used for educational purposes.

5. Solve a Financial Problem

As you organize your budget, you should start to recognize if you have any financial bottlenecks that are causing your finances to go off-kilter. For instance, if you notice your grocery bills are higher than they seem like they should be, focus on working harder to save money on groceries. Or you may want to apply for a credit card that offers cash back on groceries, as long as you commit to paying off your bill each month.

Or maybe you'll notice you are paying a lot for car or homeowners insurance. Determine if you need all the coverage you have, and comparison shop to see if you can bring down your premiums.

Often, if you can solve a financial dilemma, such as overspending on a credit card, you'll end up with a ripple effect, where you have more money for other purchases, and so with one problem fixed, you may fix other problems.

The Bottom Line on Getting Back on Track

As you start the new year with new resolve, taking time to sift through your finances and take certain actions could mean that your time can save you money. Experian has free financial tools that can make it easier, such as a credit card payoff calculator and free credit monitoring that can help you create a plan and chart your progress.