Hard to believe, but the time has come to make—or to start making good on—your annual New Year’s resolutions. Perhaps you’ve already gotten to work on eating healthier, organizing your garage, or learning a new language (congratulazioni!).
How about getting your “financial house” in order? If you haven’t developed a definitive plan for the new year, try to steer clear of broad-based promises like “improving your finances” or “saving more.” Here are 10 more narrowly focused resolutions to help get you on even better financial ground.
Indentify financial goals
Right out of the gate, pinpoint exactly what you’d like to accomplish financially. Hoping to buy a home? Pay off a loan? Become debt-free? Maybe all three? By first identifying your financial goals, you can then outline a plan of attack to achieve them.
Track your spending ... all of it
One very important component of a budget is monitoring your spending habits. You’ll get nowhere if more money goes out than comes in. There are several apps and software programs to help you log your spending. Tracking what’s going out will help you identify problem areas causing you to go over budget.
Boost retirement contributions ... if you can
If it’s within your budget, consider contributing more to your retirement accounts, starting with your 401K. Many employers offer a 401K match, so put in at least enough to equal the maximum match. (A common employer match is 6% of your salary.) You may also want to consider contributing to an IRA, even if your employer offers a 401K plan. “IRAs often have additional benefits, including more investment choices, tax advantages, and more flexibility about when to contribute—including for the previous year if you haven’t already filed your taxes,” said Matt Schneider, CFS Financial Advisor for SELCO Investment & Retirement Services.
Fast-track your debt payoff
Repaying all your debt isn’t always realistic in a short period of time, so an alternative is to speed up the process a little. Try dropping in an extra $50 or $100 per month toward your debt bills and go from there. And there are always the popular avalanche or snowball methods to knock down what you owe.
Trim the fat (cutting back on bad money habits)
We all have bad money habits—buying a bigger TV than we need, dining out too often, using credit to cover food or rent. Referring to your spending log, identify the bad habits and take a disciplined approach to eradicating them. If the impulse to indulge is too strong, consider bringing in outside support from a friend or family member.
Learn from your mistakes
Whether it’s not saving soon enough for your retirement or taking on too much student-loan debt, we all have regrets when it comes to personal finance. Take a close look at your financial performance from the previous year and start making any needed adjustments. Did you overspend? Take out too many loans? Figure out what you could have done to minimize the financial damage and bring those lessons into the new year.
Reorganize your money
Whether you’re saving for retirement or managing your portfolio as a retiree, it’s important to keep a watchful eye on your long- and short-term goals and adjust on the fly. Consider meeting with a financial advisor to learn more about sustainable lifetime income options. Or at least explore safe options that keep your earnings ahead of inflation.
“Many times, confusion and fear about investment risk cause people to make decisions that can have a negative and lasting effect on their financial future and retirement goals,” Schneider said. “Consider meeting with an advisor to evaluate all stages of investing— whether it’s starting, rebalancing, or just reviewing.”
Protect your estate
Estate plans aren’t only for the well-to-do. Everyone should take a few simple steps to protect the future of their heirs:
- Review your beneficiaries. Keep up to date on information about designated recipients of proceeds from your life insurance policies and retirement accounts.
- Update or prepare your will. A will outlines how your possessions will be distributed.
- Make sure your assets are titled. How your assets are titled determines to whom interest in the property is disbursed.
- Designate durable powers of attorney for health care. Trusted and competent family members or friends make health-care decisions on your behalf.
- Consider a revocable living trust. This is especially vital if your estate is large and complex.
- Protect your estate documents. Make sure someone you trust knows the location of—and has access to—these important documents.
If you feel like you’re just going through the motions with your finances, consider feeding your brain with a personal finance podcast or book. SELCO also has financial advisors available for free consultations—not just about investing but on a wide range of personal finance topics. They are a great resource for education or advice.
Take 'no-spend' for a spin
Ever thought about how much you spend every day? You’re right, you probably don’t want to know. Try committing to an occasional “no-spend” challenge and see if it suits you. Pack a lunch all week for work, pause the online shopping, and play board games with your family at night. If this method really takes hold, it could be the nexus of a frugal financial habit.
Now that you have some financial resolutions to mull over, it’s time to follow through with your goals. Identify exactly what you want to accomplish in the new year, keep it realistic, and hit the ground running. Onward toward more financial freedom in the new year and beyond!