Table of Contents
Table of Contents
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.
- Update Your Financial Goals: Review your spending habits, savings, and goals at the start of the year. Make necessary adjustments based on life changes and set yourself up for success.
- Review and Manage Retirement Savings: Assess your retirement plan, diversify or rebalance your portfolio, and take advantage of catch-up contributions if eligible. Seek professional advice if needed.
- Prepare for the Unexpected: Build an emergency fund with three to six months of savings and ensure your insurance policies are up to date. Consult a financial representative for guidance.
- Manage Debt: Create a plan to pay off debts, prioritizing high-interest ones. Consider seeking assistance from a financial representative to determine the best approach.
- Educate Yourself on Personal Finance: Commit to learning about personal finance topics throughout the year. Utilize educational resources, classes, podcasts, or books to improve your financial knowledge.
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 to retirement accounts 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 policies, 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.
Ways to Check In on Your Financial Resolutions
You may have discovered that it can be easier to make a New Year's resolution than it is to keep it. If you committed to financial resolutions at the beginning of the year but feel like you've been slow to make progress with your personal finance goals, that's OK. It happens to everyone. Still, there are several ways to check in and help yourself get back on track.
Revisit Your Personal Finance Goals
Sticking to a budget, increasing your savings, managing student loan debt or accomplishing any other financial goal may only be achievable if you track your progress. If you look at what you've saved and realize you're short of your goal, you may want to ask yourself why. For example, if you wanted to save $200 a month for a down payment, but you're still eating out, then you might want to start with small changes to reduce the amount you spend in this category.
If eating out is an indulgence you just can't give up, consider looking at other places where you can cut back or earn more money — whether it's getting a less expensive gym membership, making extra money with a side job, or choosing a local vacation destination rather than one that comes with pricey airfare.
Also, you might want to evaluate whether your goal is actually achievable in the time frame you've established. Maybe you set a big, hairy, audacious goal to challenge yourself. That's commendable, but the beauty of financial resolutions is that you can always change them. If saving $100 a month isn't feasible, you might reset your goal to save $75, $50 or even $25. The point is to start establishing good financial habits you can build on. If you haven't already used the SMART goal setting framework, which calls for setting specific, measurable, achievable, results-focused and time-sensitive goals, now may be a good time to try it out.
Leverage Technology to Help You
If your financial goals require a lot of manual work — such as transferring money at the end of each month to a dedicated savings account — it might help to automate your habits. Many financial institutions offer online banking solutions that let you set up recurring payments or transfers, so whether your goal was to pay down debt or increase your retirement savings, you can likely remove a step by making this process less manual.
Technology can also help with paying down debt. Let's say you planned to pay off your debt with the highest interest rate first but are struggling to make a dent in what you owe. You could use an app or calculator to see how retooling your strategy could help you make more progress. For example, you might find that paying off the smallest sum of debt first is easier and will make you feel like you've earned a small win. This may boost your motivation to keep going.
Create a Reasonable Reward System
Achieving a goal is that much sweeter when you can reward yourself for it. If you've been working overtime to pay off your own credit card debt or to save for a house next year, consider rewarding yourself with a small treat. This could be going out to the brunch place you've avoided while you tried to save or having a guilt-free weekend of binge-watching every show on your DVR.
If you'd like to reward yourself with a purchase, consider making it small but meaningful. For example, if you maxed out your 401(k)for the first time this year, you may want to treat yourself to a new pair of running shoes for the 5K you signed up for. Rewarding yourself along the way to accomplishing your larger goal may help increase the chances you actually achieve it.
Hold Yourself Accountable
Research indicates that sharing your goals with others actually deepens your commitment to the goal. To make yourself more accountable, consider posting your financial resolution or financial goal on social media, or tell your friends and family. This could be a good way to make progress and find yourself at the December 31 finish line having accomplished what you promised to do on January 1.
If you set financial resolutions at the beginning of the year, consider checking in on your progress and potentially refining your approach. While these ideas can help you get started with saving money, you may also want to speak with a financial representative.