A Plan to Improve Personal Finance Substantially by the End of the Year

Life is full of obstacles and other priorities in the moment that make it easy to put off financial planning until down the road, but the problem is that time goes by just way too fast and pretty soon before you know it you are halfway to retirement age and not much to show for it.  Before it is too late and you can salvage some financial future, the time is now to improve your personal finances significantly by the end of the year even.

Sit Down to Review Full Financial Picture

Whether it is your spouse, a knowledgeable friend or family member, or even a financial planner, you will need a place to begin.  This would be the all-important step of reviewing what your goals are, and put a place in place to reach, while paying off debt and increasing savings.  This could be a good time to go over current spending habits as well to look at areas of improvement, as you will want to reduce unnecessary spending.

Create a Budget You Can Stick To

This is where it gets tough and will take a little tweaking along the way.  You will need to note every dollar that comes in as far as income goes, and everything that goes out.  This would be monthly expenses and all spending as far as food, gas, and fun, and not to forget contributing to a savings account.  As you specify how much money goes to each, the trick will be to make sure that is enough to cover and realistically stick to it.  If you can, you will reduce spending and open up plenty of extra cash.

Build Up an Emergency Fund

An emergency fund is good to have as a place to access cash if you need it, and the key word being in an emergency.  As part of the budget you will want to reduce spending and every dollar will be accounted for, so a large unexpected expense such as auto repair may throw your budget out of whack, so instead of putting on a credit card, you can access your emergency fund to pay for.  Experts say that three to six months is sufficient, with six being there to cover an unexpected job loss.

Increase Retirement Contributions

Now that you are trending in the right direction and hopefully freeing up extra money each month as you are reducing spending, you should start to increase your contributions to a work 401(k) account or an IRA, where you can grow over time to hopefully support you after you have retired and live out the remaining of your golden years.

Continue to Make Progress

If you have followed these steps you should be in pretty good shape in the upcoming months, with the hope that you have been able to successfully figure out your goals, create a budget that you can follow, and by the end of the year hopefully you’ve been starting to build that emergency fund so that you will then be able to put your efforts to saving for retirement.


  1. It’s common in the PF community to recognise an emergency fund. However, I swim against the crowd on this one. Nowadays, if you’re saving (not specifically for emergencies) and taking a portion of those savings to invest on a regular basis, your investments can be your emergency fund. Let’s say you’ve started to build a portfolio of equity investments – well these are highly liquid. If you sell you can normally get the money in your account within a couple of days. Why do you need an emergency fund when you’ve got such liquid funds available to you but earning an even higher return?

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