Which Personal Finance Activities Should You Focus On?

Many people are paying more attention to their personal finances at the start of 2026. They want to increase their savings, pay off their debt, and improve their financial picture.

Understanding which personal finance activities to focus on helps narrow down what you spend your time and energy doing. Starting with one area and working your way to other areas can make a substantial difference in your net worth. The following guidelines can help.

Setting Financial Goals

Develop specific, measurable, achievable, relevant, time-bound (SMART) financial goals:

• Clarify exactly what you want to accomplish by a certain time.

• Include the amount of money needed and actionable steps to attain your objective.

• Track your progress.

• Modify your activities as needed.

• Maintain accountability for your actions and the results you achieve.

Managing Your Money

Money management consciously directs where your dollars go. This process involves knowing the amount of money you have at a given time and spending according to your short- and long-term needs and goals. Proper money management eliminates waste and optimizes your income.

Tracking Your Cash Flow

Knowing where you are spending your money enables you to change your saving and spending habits. Tracking your cash flow reduces budgetary waste.

These tips help track your cash flow:

• Carry a small pad of paper with you to write down every purchase.

• Organize and total your receipts at the end of the day.

• Make purchases with your credit card to create statements detailing where and when you spent money.

Tax Planning

Put the maximum amount into your employer-provided retirement plan to substantially reduce the amount you pay in taxes:

• Contributions to a tax-deferred retirement plan are made with pre-tax dollars.

• Lowering your taxable income can reduce your marginal tax rate.

• The contributions grow tax-deferred.

• Withdrawals during retirement are taxed at your new tax rate, which likely will be lower than your current rate.

Maximizing Individual Retirement Accounts

Traditional and Roth Individual Retirement Accounts (IRAs) offer tax-advantaged savings:

• If your employer does not offer a tax-deferred retirement plan, a traditional IRA offers tax-free compounding interest and immediate tax deductions, lowering your tax burden.

• Contributions to a Roth IRA are made with after-tax dollars, accumulate tax-deferred, and may be withdrawn tax-free if the account has been open for at least 5 years and you are at least 59 ½ years old, or the funds are used to purchase a first home.

Dollar-Cost Averaging

Dollar-cost averaging spreads investment risk:

• You regularly invest a set amount of money, regardless of the stock market’s performance.

• Consistent investing purchases more shares of stock, mutual funds, or other investments when the price is low and fewer when the price is high.

• You don’t need to stock pick, which even professionals aren’t always successful at doing.

Monitoring Your Insurance Coverage

Evaluate your insurance policies in the following areas at least annually to ensure the coverage meets your changing needs:

• Life insurance: Covers your funeral and last-minute expenses and replaces your income if you prematurely pass away.

• Health insurance: Covers the cost of medical expenses in case of an accident, serious illness, or pregnancy.

• Homeowner’s or renter’s insurance: Covers your personal property and personal liability while protecting the lender against mortgage nonpayment.

• Auto insurance: Covers expenses relevant to accidents.

• Long-term disability insurance: Provides an income stream in case of an injury or illness.

Creating a Spending Plan

Use a spreadsheet or template to create a spending plan:

• List your expenses in the “current” column, such as your mortgage or rent, insurance policies, emergency fund, retirement accounts, groceries, utilities, and entertainment.

• Analyze each expense.

• List in the “projected” column how you would prefer to spend for each line item.

• Focus on expenses you can reasonably reduce or eliminate, such as lattes, dining out, and streaming services.

• Emphasize increasing your savings for emergencies such as car repairs, short-term goals like a down payment on a home, and long-term goals like retirement.

The following tips can help increase your savings for emergencies and goals:

• Use coupons and buy house brands instead of name brands at grocery stores.

• Prepare and freeze meals for the week rather than ordering takeout.

• Pack a lunch for work rather than going out.

• Reduce to one streaming service.

Paying Yourself First

Have a set amount from each paycheck automatically deposited into your emergency fund, savings account, and retirement account(s). Paying yourself first increases the likelihood of spending the money for its intended purpose.

Saving Money

Saving part of each paycheck helps prepare for emergencies, goals, and retirement:

• Setting aside at least 3-6 months of income to cover surprise expenses, such as car repairs or a job loss, helps you avoid taking on debt.

• Living below your means enables you to create a comfortable lifestyle.

• Investing for retirement lets you stop working one day.

Adding to Your Savings

Save your monetary gifts, tax returns, bonuses, and raises. Living on your previous income while increasing your savings helps create assets, creating financial stability and elevating your net worth.

Wisely Using Credit

Effective use of credit helps you build a positive credit history, enabling you to finance major purchases such as a car or home:

• Use one or two credit cards with low interest rates, generous grace periods, and no annual fees.

• Spend only what you can afford to pay back by the due date.

• Avoid cash advances, which immediately begin accruing interest at a rate above the one applied to regular purchases.

• Pay your bills on time to avoid late fees and interest charges, which increase the cost of the products or services and your debt load.

Managing Debt

Prioritize taking on good debt, such as purchasing real estate, to increase your assets and net worth. Minimize bad debt, such as clothes and restaurant meals, which don’t accumulate monetary value.

If you have excessive bad debt, these tips can help reduce it:

• Stop taking on additional debt.

• Contact each debtor to discuss interest rate reductions.

• Pay more than the minimums to accelerate debt payoff.

Reading Your Credit Reports

I recommend reviewing your credit reports from TransUnion, Equifax, and Experian each month and freezing your credit:

• Reading the information on your credit reports enables you to verify their accuracy and uncover potential issues.

• Limiting access to your lines of credit can help avoid identity theft.

• Identity theft takes a substantial amount of time away from other activities you could be doing, and could cost you thousands of dollars.

My Experience with Identity Theft

I believe my information was stolen in a 2014 data leak from a major corporation I often shopped at:

• When I reviewed my credit reports in 2015, I discovered that someone in another state used my personal information to open a credit card.

• Several months later, I received a phone call from a debt collector stating I owed twice the amount borrowed from a major lender because no payments had been made.

• Many months later, I received a phone call from a bank in a foreign country, stating I defaulted on a loan.

All of these activities caught me off guard.

After I learned that someone had stolen my identity:

• I spent countless hours filing reports with the police, Federal Trade Commission (FTC), the IRS, and other government agencies.

• I spent a substantial amount of time faxing affidavits to financial institutions, stating I had no knowledge of these debts and did not authorize them.

• I notified all three credit bureaus of my experience with identity theft.

• I froze my credit so that no new debts could be created.

Fortunately, I did not end up owing any money. However, the seemingly endless number of hours I spent compiling information, along with the weeks of no sleep while trying to run my businesses, had me exhausted.

I have not uncovered any more fraudulent credit cards on my credit reports or received calls from debt collectors. I unfreeze my credit only when needed so that no additional lines of credit can be created without my knowledge. I do not want any repeat experiences in the future.

Monitoring Your Net Worth

Awareness of your net worth helps you attain your goals. You can calculate your net worth by subtracting your total liabilities from your total assets. Use your results to focus on owning more than you owe.

*This information is for educational purposes only.

Is there anything I missed? Let me know in the comments!