Financial Resolutions for the New Year
Financial Resolutions for the New Year
New Year’s resolutions are often for physical goals and changes, but being sure you’re in great financial shape is important as well. Have you thought about some financial resolutions for the new year? Whether you want to reduce debt, increase your savings or just get your finances in order, we have a few best practices to help you get started as you work toward creating positive financial resolutions.
Set Goals and Create a Plan
Most of your goals for the new year will require money and a plan in order to reach them. Start by making a list of your goals and creating a savings plan for each. You can designate specific amounts of your check to be automatically transferred to your savings account, transfer funds yourself each month to a savings account, use financial organization apps or resort to the old fashioned piggy bank or envelope method. Your budget is also a part of your overall financial plan. Begin setting weekly or monthly budget amounts for groceries, entertainment, shopping, eating out, etc., to hold yourself accountable and make sure you are not overspending. Create a system or spreadsheet to keep track of how much you are spending in each of these categories so you can get an accurate feel for where your money is going and where you can cut back. You may notice you’re eating out more often than you realized, or spending far more on entertainment than your budget allows. Once you have identified where your money is going, it’s easier than you think to make small changes to cut back and redirect that money into saving for your goals.
Grow Your Emergency Savings
Once you have your plans, budget and goals established, you can set some focus towards your emergency savings. It is recommended to save at least three to six months of non-discretionary expenses, like your mortgage, rent, utilities, car loans and other bills that must be paid each month for your emergency fund. If you do not have an emergency fund, create a budget and start small to grow this fund to help prepare you for any unanticipated expenses that could arise. To get started, ask your employer about direct deposit options that allow you to transfer a specific amount of your pay check towards your savings account automatically. This is a popular savings idea because it is automatic and there are no additional steps you need to take unless you want to or are able to increase the amount being saved. Start with a small amount like $20 and build from there. Another popular idea is to think about the expenses or subscriptions you are currently paying for and evaluate if some of these can be canceled or paused to allocate these amounts toward your savings. Contributing toward your emergency savings is great for your long-term goals and financial security which will help eliminate financial stress and steer you toward financial independence.
Improve Your Credit and Decrease Debt
Improving your credit and decreasing debt go hand in hand, but one may require more focus than the other depending on your situation. Your credit score is like your financial report card. Keep in mind that approximately 35% of your credit score is based on your credit payment history. You can increase your score by beginning to pay off any past due payments and setting up automatic payment services to ensure a payment is never missed in the future. Review your budget to see if you are able to reallocate money towards paying off balances. Two popular debt consolidation methods are the avalanche and snowball methods. Check out our Improve Your Credit Score in 4 Easy Steps blog for more information about developing a payment plan of action. Next you can integrate new positive spending habits and only use your credit card if necessary, especially while trying to pay off your current debt balances. This doesn’t mean you can’t make charges on your credit card, using it can actually increase your score as long as you are also actively paying down your monthly balances.
Research shows that there is a clear correlation between financial stress and poor physical health, so it is more important than ever to take control of your finances. This means encouraging and maintaining good financial health for you and individuals in our communities in order to foster a healthy and thriving economy. Whatever you decide to include in your financial resolutions for the new year, the most important thing is to begin the thought process now. Cheers to setting new financial resolutions!
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