Picture this: the new year rolls around, and you make a commitment to save more. Sure, you have credit card debt that’s racking up interest and massive, unpaid student loans, but once you start saving, you’ll be fine.
You’ll make a budget and stop spending so much on nonessentials. Maybe you’ll even invest a little bit.
Unfortunately, that’s often when reality hits people.
They realize that the financial habits they’d built up to that point are setting themselves up for failure. They don’t really know where to start saving money, budgeting, or paying off debts.
The even more unfortunate truth is that most give up on their New Year’s resolutions before January ends.
The good news? You don’t have to be one of them.
Today, we’re not only going into some New Year’s financial resolutions you can set, but also some practical ways to achieve them.
Listed here are some things you can do, adjust, or avoid.
It may not be a cakewalk at the start, but each step you make will benefit you in the future. Not only that, but you’ll be able to build better habits that will help you out for years to come.
Each new year is the best time to determine what you have. Take account of each of your accounts, investments, and other assets in your possession.
Some of them may not be as noticeable until you’ve put them into paper. Once you have these listed, you can also place any cash flow coming from jobs, businesses, and the like.
Then once you’ve got that down, you can begin listing down any liabilities. Some examples include:
From there, it’s all about balancing the two sides. You don’t want to have too many liabilities that eat up your assets, stunting growth.
Listing them all down will help you realize areas you may be overlooking. Then you can make any changes you deem necessary.
Even if you aren’t the CEO of a billion dollar company, you can still save money. It doesn’t take much to start saving – it only matters that you start.
For most people, it’s one of their primary financial goals during the new year.
However, you can’t blindly save money without a goal. If you don’t know where it will go, you won't have the motivation to push through with it.
Make sure you have something set long-term, like retirement. You can even do it for a short-term goal, like an expensive item or a vacation.
The important thing is you’re training yourself to become more disciplined with your money. Some people like setting up automatic bank transfers, while others put cash in envelopes.
You can even create a separate high-yield savings account. Transfer the money you want to save there and get a little bit of interest.
You may think that retirement is a few decades away, but the earlier you can start, the more money you can get when the time comes. If you feel like you’re a little too late, you should know that saving anything is better than nothing at all.
Every dollar counts.
You don’t even have to feel like you’ve lost time doing it. You can save more aggressively until you’ve caught up with most other savers.
Almost everyone in the U.S. has some form of debt, whether it's personal loans or credit cards. Because the economy revolves around credit, it’s vital to manage these well.
However, the new year presents you with an opportunity to begin whittling down your debt. One of the best ways you can do that is to tackle them one at a time.
Fulfill your minimum payments to avoid accruing interest. Then add extra money to debts with the lowest balance to wipe them off.
Eventually, you’ll get to a point where you’ll only have a few to worry about.
The faster you can take debt off the table, the better it will be. Be diligent with your payments, and you can eventually unlock credit cards with lower interest rates and more benefits.
Stay wary about spending money you currently don’t have. Try to track where your money is going and anticipate when you can make payments to avoid going overboard.
We may think we are frugal with our purchases, but impulsive decisions can be unavoidable. It can be as simple as eating out more or buying that extra cup of coffee every morning.
You don’t have to sacrifice your lifestyle, but you can make changes to reduce the money you use. The money you save here can open up other opportunities like investments or savings.
The first thing you need to do is make a list of where your money goes. One thing people overlook is their monthly subscriptions to services and goods.
Here are some things that may be a part of your list:
You can write down an average of how much you spend. The more detailed you can be, the better. Knowing where your money goes helps you evaluate whether they’re worth keeping for this new year.
Even if you set a financial plan early in the year, many things can happen month after month. You need to set a schedule to review your finances and adjust them.
For example, if you suddenly encounter significant payments you need to fulfill, then you’ll need to cut down on some areas. Alternatively, if you were promoted or gained other forms of income, you can increase areas like savings.
You should not set your financial goals in stone. Adaptability and versatility are needed to reach them as early as possible.
Even a slight increase can help you save for that vacation or diversify your portfolio. You can also update it to check your savings and how far you are toward your goal.
The sense of moving forward will motivate you to stay disciplined throughout the year.
Credit scores take time to build, but that doesn’t mean you can’t work on it this year. Improving it is a simple process.
All it takes is that you stay disciplined towards your payments. Avoiding late or missed payments can significantly bump your score up.
A credit score takes momentum, and you have to work on it as early as possible to reap the rewards.
If your credit score remains untouched, you may want to begin working on it. It doesn’t mean you have to take on debt.
For example, you can use a credit card to make payments when you already have the cash ready to pay for it. That way, you are improving your credit without actually overspending.
You may already know how many positives an excellent credit score can bring. Lower interest rates and fees can accelerate your financial goals.
You can also open yourself to cards that bring in more benefits. The easiest way to go about it is to have a card that fits best with your lifestyle.
Even if you have a list of all your assets and liabilities, budgeting is a different ordeal. You need to set a value to your expenses and set limits.
By creating a budget, you can know where you’re overspending and what makes the most out of your asset flow. Like any other part of your finances, budgets also adjust as we go about our lives.
Budgeting isn’t as hard as you think it is. With technology, it’s even easier to track.
You can set your spending and limits through an app, with it acting as a more dynamic notebook you can bring around. Being aware of the ceiling is the first step, and then you can figure out what you can do with the financial space you’re creating for yourself.
Rebalancing can be as easy as talking to an advisor like at 121 Financial Credit Union and tracking the progress of your investments. For others who want to be more involved, you’ll notice that some of your choices may have underperformed.
There may also be some investments that went above and beyond your expectations. By examining your portfolio, you may notice if you’re over-exposed in an asset class or if there are opportunities you may be overlooking.
It is not for everyone, but those who are more active with investments will always want to rebalance. You want to learn if markets have a high probability of going up or down.
That way, you can place your money in a more balanced state.
Rebalancing helps you avoid those drawdown periods by having money spread in different baskets. Switching your crypto assets to stocks can be helpful if you expect one to go down long-term.
It all depends on market conditions, which is why rebalancing at least once a year is a recommendation.
While it doesn’t happen often, some negative factors may appear on your credit report from time to time. They could be errors, missing payments, or unreported ones.
Any of these can affect your credit score, pulling it down or preventing it from improving. Trying to do this on your own can be tedious, which is why there are many services out there that help you at a low cost – just be wary of scams.
If you don’t want to spend the extra money, the credit bureaus release a free report you can get once a year. Some free websites monitor your credit.
You want any errors fixed as early as possible to help you avoid high-interest rates and poor loan plans.
Checking your credit report can also reveal information you may not know. For example, there might be charges on your card that you didn't know existed.
It might even be a system error and that you never used the card for that transaction in the first place. Righting these wrongs can build a solid foundation to improve your credit for the future.
Many of us have insurance plans that go overboard with the benefits. While some may find it essential, you still want to review it.
Some of the things you can check include:
You could be paying hefty premiums for added coverage you don’t need. Give it some thought, and you can even consider lower-cost plans if you think that’s enough for you.
Whether you need more or less depends on how satisfied you are with the coverage. As long as it isn’t taking a large portion of your income, it will be fine.
The new year provides a great opportunity for everyone to have more control over their finances. There are some uncontrollable factors in life, and your money doesn’t need to be one of them.
By applying any or all of these resolutions, you step towards a healthier financial future. You don’t have to work on them all concurrently, but step-by-step action can lead to the results you desire.
If you ever need professional help in any of these areas, having 121 Financial Credit Union at your side will be beneficial. We have the knowledge and tools to help you fulfill your resolutions.
Contact us today to find out more about our services and how to to become a member.