Six Financial Resolutions for the New Year
It’s a brand new year and the perfect time to set budget-friendly resolutions that can pave the way to a more financially fit future. Whether you’re looking to save for a specific goal, pay down debt, or just make smarter financial decisions, these resolutions can help you manage your money more effectively and provide ongoing financial wellness for the coming year.
- Create (and stick to!) a budget
If you don’t have a monthly budget, create one now. Track your spending and income over several months, and then make a list of every ongoing expense along with all your monthly income streams. Assign a dollar amount to each expense category, being sure to include savings and retirement planning. If your columns are equal or your income exceeds your expenses, you’re doing great. However, if your expenses outweigh your income, you’ll need to trim your spending or look for ways to increase your income.
- Build an emergency fund
Did you know that 69% of American households have less than $1,000 in emergency savings?
An emergency fund is your financial safety net. Without money set aside for an emergency, an unexpected expense can easily send you spiraling into debt. Experts recommend having three to six months’ worth of living expenses in your emergency fund. This will provide you with peace of mind and the financial security to get through unexpected expenses.
Resolve to build an emergency fund this year by setting aside a small sum of money each month until you have a nest egg that can get you through virtually any emergency.
- Trim your expenses
Take a long, hard look at your spending habits. Have your expenses started trickling upward in any area(s)? For most people, expenses will continue to rise with the passage of time and with changing life circumstances unless they make a conscientious effort to control them. Reviewing your spending is the first step in reigning those numbers in. Identify your weak areas and brainstorm for ways to start spending less. For example, you can resolve to start eating out less, cut down on some subscriptions you don’t really need, and/or make your own household cleaning products. Remember: Small change today adds up to big bucks tomorrow.
- Pay down debt
High-interest debt can be a big burden for any budget. In addition to paying interest that essentially goes nowhere, the money paid towards debt could be channeled into savings or investments that can grow significantly over time.
Make this the year you pay down debt, or at least make real headway toward getting rid of it for good. You can choose to prioritize high-interest debts, like credit card balances or personal loans, or work on paying off your smallest debt first to keep your motivation going. Trim your spending and/or increase your income, and use the extra funds to maximize payments on your chosen debt until it’s paid off. Then, move on to the next debt on your list until you’re completely debt-free.
- Automate your savings
It’s all fine and wonderful to resolve to put more money into savings each month, but how do you turn those good intentions into reality? The answer is simple: by automating your savings.
Set up automatic monthly transfers from your checking account to your savings or investment accounts so you never forget to feed your savings again.
- Expand your financial education
Financial literacy is an invaluable asset. Invest in your financial education this year by reading books, taking online courses, listening to podcasts, or attending seminars on personal finance. Understanding concepts like investing, taxes, and retirement planning will empower you to make informed decisions that can help ensure a financially secure future.