How to Reset Your Finances for the New Year

This post contains affiliate links. By purchasing through these links you are helping me keep The Homemaker's Cottage running with no added cost to you!

There’s always so much pressure in the new year to be better, do better, and feel better; and yet, every year, we usually don’t. One of the biggest factors that many people struggle with is the lack of funds come January. Christmas has depleted the coffers, so to speak, and we’re starting a new year with new expectations, peer pressure, and an empty wallet. So how can we reset our finances for the new year to have them work for us instead of us working for them?

1| Reflect Before You Reset

One of the most important things you can do in your finances is truly reflect on what your finances have looked like in the past. By doing so, you’re giving yourself the answer key to getting your finances right this year.

First, we need to look back at the previous year without guilt. Of course, mistakes were made, but let’s truly identify what’s going wrong without having emotions play a role. Do you feel bad about that one shopping spree? Or maybe too many TV subscriptions? We all have things we can work through, but it’s really important to be able to give yourself a new start this year without the guilt from last year.

Next, we need to identify your current financial situation: Are you struggling to make ends meet? Are you stable in your finances, but not much room to grow? Or maybe you’re able to grow and are looking to do it wisely?

Once you identify that, it’s time to reframe your finances and the way you see them. You are the steward of the finances that God has given to you. Your finances do not decide your success or failure, and you will probably still make mistakes, but it’s important that you shift your mindset and understand that if you are not a good steward of your finances, anything could happen, and you wouldn’t be ready to handle it.

The plans of the diligent certainly lead to profit,
but anyone who is reckless certainly becomes poor.

Proverbs 21:5 (CSB)

2| Create a Simple, Livable Plan

Once you’ve let go of the guilt and emotions that often come with this, and you’ve recognized where you are financially, it’s time to take that information and make a steady plan.

To start, choose a budgeting method that fits your real life. There are four main budgeting strategies:

1. The 50/20/30 Budget
2. Pay Yourself First Budget
3. Zero-Based Budget
4. Envelope Budget

All of these budgets are good (and you can read more about them above). But there are more budget types out there if none of those fit your lifestyle.

For those of you who are curious, I use the Zero-Based Budget and have for many years now, and it works for our family. I’ve also done the Envelope Budget before, but having a cash-based budget living in the boonies doesn’t work for our lifestyle.

Once you’ve found the budget that works for you, you can then set gentle, but realistic financial goals for yourself. Whether that’s getting out of living paycheck to paycheck, or building your savings or retirement, SMART financial goals are important.

It’s also very important that you build in a margin for emergencies and changing needs. If you’re living paycheck to paycheck, then maybe your goal is to gain more income. Or to create an emergency savings account. If you’re looking to increase your savings, then maybe you need to move some money out of shopping or personal expenses and move it into a Roth IRA or an index fund.

Remember, budgets (just like New Year’s goals) are wonderful, but they change throughout the year. It’s important to remain flexible and able to go with the “cash flow,” so to speak.

3| Reset Daily Habits, Not Just Numbers

We can look on paper and see what’s draining our budget. But we really need to look into our daily habits and see what is causing leaks in the financial boat. Do you stop and get a treat before work each morning? Do you order from Amazon each week? Maybe you have subscriptions to every TV provider. Whatever habits you have, it’s time to really be diligent in the stewardship of your finances and crack down on these bad habits.

Being intentional in your finances means being intentional in your life. By creating weekly rhythms to check in on your finances, you give yourself the necessary time to keep on top of your financial goals. Over at The Homemaker’s Corner, we check in with our finances on Fridays, or every other Friday. It’s important to take the time to sit and look at every transaction coming through to make sure there are no holes in your ship.

Lastly, one of the other ways you can help yourself financially is by including your family. One way could be having monthly finance meetings with your husband. Another idea could be asking an older and wiser family member for advice. You can also (if you have kids), involve them with making things from scratch or at home, whether that’s cleaning products, or food, to help you save money instead of buying more or eating out.

While I suggest reading through this post and applying these steps to your life, sometimes that can be overwhelming. So maybe for this week, depending on where you are in your financial journey, pick one step and go from there. Even slow progress is still progress. We shouldn’t look for perfection in ourselves or in our goals for the new year. Rather, we should look for progress towards the eternal goal.

If you’re looking to change your financial story and need a place to start, check out our Free Printable Monthly Budget below!