New year! New you! How did your finances fair over the last 12 months? Too many people had a rough financial year! Are you able to get back on track now? Let’s talk about financial resolutions. Here are 9 financial resolutions to consider for this year. Make this year count!
Goals Goals Goals!
I always have to start with this one. What do you want to accomplish this year? In 5 years? 10 years? Retirement? Your goals are going to be different from another person’s goals. Are you looking for a loan soon? Work on your credit. Not everyone needs to do this. Do you have issues with money management? Work on creating a realistic spend plan. Not everyone needs to do this. Do you want a beautifully funded retirement nest egg to look forward to? You get the picture. Write down your goals. Keep them front and center. Focus on them. Put your energy (and money!) toward them.
Create a realistic budget for you
How many times have you tried this? And not succeeded? Something always comes up, you get frustrated, and quit. It’s probably because your budget wasn’t realistic for your life and situation. I always say, you have 100% of your money to spend. Not 110%, not 125%. You have 100%. What are you going to allocate for eating out? Groceries? Mortgage? Entertainment? The list is as long as the number of categories you have. When creating your budget, please don’t forget to include unexpected expenses or miscellaneous expenses. When I have created budgets with clients, I can’t tell you the number of times I’ve heard “That was just a one time thing.” or “This just came up”. The thing is… something usually comes up every month. Every. Single. Month. You need to start incorporating this into your budget. It may help alleviate some of the frustration.
Print up bank statements to get a clear black and white picture of where your money is currently going. Are you surprised at some of the expenses? What can you tweak? The most painless to “find” more money is take a close look at your subscriptions. I can almost guarantee you that there is at least one or two that you are paying for that you aren’t using anymore. Cut those out!
Emergency fund
This is so super important! When the unexpected expenses come up (notice I said “when” and not “if”), you will feel so much better reaching into your savings account than reaching for that high interest credit card or taking out a loan. You should have at least 3-6 months worth of expenses in there. However, your life, situation, job, etc may require more to make you feel comfortable. That “comfort number” is going to be different for everyone. What dollar amount do you want to see in there for your to feel comfortable? Now break that down into manageable weekly transfers and automate it. See more below under the “automate payments” heading.
Retirement accounts
Are you contributing at least the amount to your retirement account that your employer matches? If your employer will match your contributions up to 5% (for example), you should be contributing at least 5%.
Can you max out your employer retirement account? If so, do it! Do you also have an IRA? Can you max that out at $6,000 (for 2021)? If so, do it! Set up your retirement nest egg. Your future self will love you.
Credit Score
When was the last time you checked your credit score and report? You should be doing that at least once a year. If you have not checked it recently, make that a resolution. This is extra important if you are applying for a loan in the near future. Get your credit cleaned up so you can take advantage of the best rates available. The two biggest factors that make up your credit score are your payment history and your credit utilization ratio. This is just a fancy term for how much are you spending compared to how much credit is extended to you. For example, if you have a $5,000 balance and a $10,000 credit limit is extended to you, your credit utilization ratio is 50% (by the way, that’s high). Taking care of those two factors takes care of about two-thirds of your credit score. Do you know what else goes into your credit score? Read here.
Automate payments
Automating all your payments takes less than half and hour and can free up so much worry! Imagine not worrying about if you paid that bill or transferred money into your savings account. Set up everything on autopilot and focus your attention elsewhere. Remember, I’m talking about both your bills and your money to your savings account. This can all be done online. Go to your lenders’ websites and find where they have “autopay” (or some variation of that word). You should get an email confirmation every month before your bill payment gets drafted and again after it gets drafted. Automate a transfer to your savings account as well if it needs to be cushioned. I like a weekly transfer because it’s not as much as if I were to do a monthly transfer. I didn’t even miss the money leaving! That means I also didn’t think about the money leaving.
Pay down debts
Not only will this take a burden off your shoulders, you will also have more money to put toward other things that bring you joy. (I’m assuming that paying down debt does not bring you joy!) Pay more than the minimum, automate your payments, and don’t add more debt while you are paying if off. Keep those three rules in mind and you will do well. If you want a strategy, I always recommend powerpay.org because after inputting your debt information, you will get a nice spreadsheet telling you what to pay to whom. It will also tell you when your debt will be paid off.
Check beneficiaries
This is a big one! And it doesn’t take much time to do. Is your money and belongings going to go to who you want them to go to when you pass? I am a big proponent of checking beneficiaries because I have seen what happens when they are not up to date. Spoiler alert – it’s not pleasant! Make it easy and smooth for your loved ones. They will already be mourning you. Don’t give them additional unneeded stress.
Have a money date regularly
After all of this, you will need to evaluate what you are doing, how it is working, if you need to reassess anything, etc. Having a money date regularly will let you know if you are on track or you need to tweak anything. Read more about money dates here.
Final Thoughts
Not everyone will need to do every single one of these. But I understand that personal finance can be overwhelming when you don’t know where to start. Here are 9 great places to start. If you are good with most of them and looking for how else to grow your money, look into investing. If you don’t feel comfortable doing that yourself, make an appointment with a good, reputable financial advisor who can help and guide you. Just like you take care of your physical and mental health, you should also take care of your financial health.
Are you looking for help taking back control over your money? Don’t let your money control you any longer! Schedule your free initial consultation with one of our Accredited Financial Counselors today and get back on track!
