Keeping your finances in order and your budget on track isn’t always easy, and 2011 may not have been your best year financially.
Whether you failed to meet your savings target or you faced a serious financial downfall this year, you can learn from your mistakes and set yourself up for a financial recovery plan in 2012.
Learning from your mistakes is actually one of the best ways to make positive changes with your finances and make progress.
If you keep repeating the same mistakes year after year, you can expect to be in the same situation time and time again.
Here are five financial lessons you could learn from in 2011:
1. Not updating your budget.
Making sure your budget is accurate and updated regularly can help you set realistic savings goals and also prevent debt problems. If you didn’t account for certain expenses in 2011, or you had a change in income and didn’t adjust your budget accordingly, you may not have any idea what your actual cash flow was for a given month. Make 2012 the year that you maintain an accurate budget and take the time to update it regularly throughout the year.
2. Wiping out the emergency savings account.
Emergency savings are there for unexpected emergencies, but wiping them out completely by year’s end could set up you up for financial troubles. While it’s fine to use some of those funds to cover expenses, try to keep a baseline amount in your savings account — even when dealing with a challenging situation. Work on rebuilding that account whenever possible and make 2012 the year that this savings account becomes a priority.
3. Fueling a credit card habit.
Credit cards can hold you over during a stressful time, but make sure you don’t end up fueling a dangerous credit card habit. Becoming dependent on credit cards for everyday expenses can put you on the fast track to a serious debt problem. Take steps to break out of your credit card spending habits so that you are managing your budget only with available cash.
4. Not saving enough.
How much were you able to save over the course of the year? If it was less than 10 percent of your monthly income, you probably aren’t left with much. Set a specific savings goal for the upcoming year and break it down by month so you know exactly how much you need to set aside after each paycheck. Keep track of your savings balance so you don’t lose sight of your goal.
5. Taking out several unaffordable loans.
Applying for multiple loans at the same time, or within a few weeks of each application, can put a dent in your credit score. Also, some forms of loans, like payday loans, can get you into a dangerous borrowing trap. If you ended up taking out more than one loan in 2011 just to stay afloat, take some time to prioritize your finances so you don’t need to do the same thing in 2012. Depending on loans to get by can be just as financially damaging – if not more – than a credit card habit. Read: The Dangers of Payday Loans.