With the end of the year approaching, many people start thinking about what they can do to make the upcoming year their best. And while focusing on health and relationships tend to be popular choices, it can also be helpful to think about your financial goals and well-being for the upcoming year.
Here are a handful of New Year's financial resolutions to consider.
1. Update Your Financial Goals
You might already have a budget. However, the start of a new year can be the perfect time to review your spending habits and savings, and reassess some of your goals.
After all, it's not uncommon for life changes — a new job, moving to a new home or a big wedding — to happen. Scheduling some time to go over last year's budget and making tweaks based on what's coming in the new year can help set you up for success.
2. Review Your Retirement Savings
Even if your retirement is decades away, it doesn't hurt to review your plan and see if any changes are needed. You might also consider reviewing your portfolio to see if it makes sense to diversify or rebalance it in the coming year.
If you have a 401(k), individual retirement account (IRA) or similar savings account, consider reviewing your contributions. A nice bonus or year-end raise might mean you have a bit more to contribute in the coming year. If you're over the age of 50, you might also take advantage of catch-up contributions that are permitted by the IRS, but consider consulting with a tax advisor first.
3. Prepare for the Unexpected
While you can't always know what's going to happen down the road, it can help to have some plans in place in case of an emergency. There are a few approaches you can consider to help prepare.
One way is to build an emergency fund. One common best practice is to have three to six months of savings set aside for easy access if you experience a sudden layoff or medical expenses. Think about creating a plan where you can set aside a bit of extra money each month that will go toward these unexpected costs.
You can also look to the future, too. That includes making sure your life insurance, long-term care insurance, disability insurance and any other policies are up to date. Consider speaking with a financial representative as the new year approaches to see if any possible changes would better suit your situation and goals.
4. Manage Your Debt
One of your New Year's financial resolutions might be to get out of debt. One approach is to focus on fully paying off a chunk of debt, whether it's a credit card, a medical bill or student loans.
You might also consider chipping away at high-interest debts first, so they're paid off, and then moving on to others. On the other hand, you might prefer to gradually pay down all of your debts simultaneously. Consider speaking with a financial representative to determine an approach that may work for you.
If you have a big purchase coming up, such as a new car or home, use your budget to help plan for and anticipate costs. That way, your progress won't end up being derailed with extra expenses.
5. Educate Yourself on Personal Finance Topics
Taking the time to educate yourself on personal finance can be a worthwhile resolution. Consider making a list of topics you want to learn more about. These may include budgeting, investing, compound interest or managing money. Then find ways to learn about each throughout the year.
A financial representative will likely be able to provide some educational materials to help you learn about various topics. You could also enroll in a class, listen to a podcast or read a book about finances. Committing yourself to learning more about money in the coming year may help improve your finances in the long run.
As a new year approaches, it's time to start thinking about your New Year's financial resolutions. With some extra planning, time and effort, you can take steps that will help you reach your financial goals.