4 Financial Resolutions for the New Year
Another new year is upon us, and with it comes a fresh start. Take a moment to shake off all the bad vibes from 2016 and start 2017 off right by resolving to get your finances in order. Below are a few financial resolutions to start you down the path to better money management in the New Year.
Set a Budget
Setting a budget is the first step to financial fitness. Without a budget, it’s difficult to know where you stand financially. Sure, you probably know roughly how much money you make each month, but do you really know where that money is going? Are you spending too much on your morning coffee or takeout or shopping? Could you be making greater payments on your debts or saving more toward retirement?
To get a better handle on your finances, you’ll need to create a budget. You’ll need to know your monthly income after taxes (net income) and your recurring monthly expenses, such as rent or mortgage payments, car payments, insurance, utilities, etc. Once you’ve gathered these items, you’ll add up your expenses and subtract them from your income. If you have money left over, you can allocate those funds for savings or other financial goals and toward things like shopping and entertainment.
Sticking to a budget is the tricky part for most. Budgeting apps like Mint can help greatly, and a quick Google search can provide you with printable worksheets if you prefer to go the pen-and-paper route.
Erase Your Debt
The average amount owed per household is nearly $8,400, making getting rid of debt another priority for 2017. Although $8,400 is a pretty daunting number, you can opt to set a goal for yourself that is more manageable. WalletHub suggests repaying 20% of your debt within a year. If 20% stretches you too thin, adjust it – try paying off 15% of your debt instead. Or, maybe you want to pay 20% of your debt off within six months instead of a year – that’s fine, too. The key is to set a goal that works for you and your current financial situation.
Don’t forget to look at other areas of your budget when you set goals. Are there areas in which you could reduce spending and then allocate those funds toward a credit card payment instead? Are there small lifestyle changes you could make to reduce spending? For example, using a reusable water bottle, walking to more places to save on gas or cab/Uber/Lyft fare, or reducing the number of times you eat out.
If you have multiple debts, like credit cards, consolidation might be a better fit. Some credit cards offer low introductory rates on balance transfers, or a personal loan may even be the answer.
Save, Save, Save
Most of us know how unpredictable life can be, which is exactly why having a healthy savings account is so important in avoiding or lessening financial struggle in the case of emergency. Establishing an emergency fund is often advised before tackling other debts, and the ideal amount you should aim to save is three to six months’ worth of living expenses.
If you already have a good chunk in your emergency fund, start working toward your other savings goals. Maybe you’d like to save more for retirement, or maybe you’d like to take that trip to Europe you’ve been planning in your head for years. Look for areas in your budget that you can adjust to help you save toward those goals. Another good tip? Start saving all your $1’s and $5’s – it’ll add up faster than you think.
Plan for the Future
Even if you’re young and just starting out in your adult life and think you’ll start saving for retirement later, don’t – retirement is a huge expense! The average American spends 20 years in retirement, and experts estimate you will need to save 70% to 90% of your pre-retirement income to maintain the same standard of living after you stop working.
Take advantage of your employer’s retirement plan and contribute as much as you can. If you have a 401(k) plan, your employer will match your contributions, usually up to a certain amount based on how long you’ve worked for them. If you don’t have retirement benefits through your workplace, you still have options, such as a Roth or Traditional IRA, or if you don’t know what your best option for retirement is, we can help.