National Financial Wellness Month | Financial Resolution Tips from Our Advisors
Now that the craziness of holiday spending is over, you may be left wanting to improve your financial health. The beginning of the new year is the perfect time to set some financial resolutions for yourself. These resolutions are a great way to build wealth, take control of your finances, develop healthier money habits and establish "financial wellness".
In order to establish financial wellness you have to define what “financial wellness” means for you. This can vary drastically from person to person. It depends on who you are, where you are coming from, and your experiences with money. A person with serious financial troubles might have different expectations than someone who has enjoyed relative financial stability.
How, then, is “financial wellness” defined? First, ask yourself what you need to feel secure, financially speaking. Here are some questions to consider:
- How much should you have saved?
- How much income should you be bringing in each month?
- Where are you at with your debt?
- Would things be simpler if you carried less debt?
- How fluid is your cash flow when it comes to expenses that are not urgent (taking your family out to dinner or on a short trip) versus larger financial goals (such as buying a new kitchen appliance)?
- Finally, and perhaps most importantly, will you be able to retire at your target age?
It is then important to establish goals and resolutions based on how you want to become financially well this year. While financial wellness can look different for everyone, here are the top four most common financial resolutions people have in the new year.
Save More Money
Saving more money is one of the most common financial goals. It’s always nice to have a little cushion or to save up for something you have been wanting. Whether it’s building an emergency fund, saving for future vacations, or saving to fund a down payment on a house, bulking up a savings account is often the first thing people think of when coming up with financial resolutions. While monthly and daily expenses can quickly derail your savings plan, there are a couple of ways you can set yourself up for success when it comes to achieving this goal.
Set specific and measurable savings goals
Instead of saying “I want to save more money this year,” say, “I want to save “6,000 this year so I’m going to save $500 a month.” By setting more specific goals, it can help you aim to achieve them and properly reflect on them at the end of the year.
Automate your savings
Set up automatic transfers from your checking to your savings. This creates a habit that you don’t even have to think about and allocates your money before you even have a chance to spend it.
Cut back on unnecessary expenses
Review your monthly expenses to see where you can cut back on spending, allowing you to save that money instead.
More helpful Information on Saving
Pay Off Debt
Debt reduction is another top financial resolution. There are two main strategies for paying off debt: the "debt avalanche method" involves paying off the debt with the highest interest rate first (such as credit card debt).1 This will save you money in the long run, as you’ll pay less interest. The "debt snowball method" involves paying off your smallest debts first while making minimum payments on larger ones.2 As each small debt is paid off, the money can be applied to the next debt. It is important to review your debt and choose the best strategy that works for you and your situation. In addition to choosing a debt repayment method, set realistic monthly repayment goals and stick to them. Even small additional payments can make a big difference over time.
Create a Budget and Stick to it
Many people set a goal to create and stick to a budget to gain better control over their finances. Budgeting helps you track where your money is going and ensures you’re living within your means. However, sticking to a budget can be tricky, especially if unexpected expenses arise. Using budgeting tools, setting realistic limits, and reviewing your budget regularly can help you stick with this resolution.
Invest for the Future
Another big goal for people is to start investing for long-term goals, such as retirement. Even starting small can help you in the long run. Make sure to maximize your contributions to a retirement account like 401(k) or an IRA. If your employer offers a 401(k) match, make sure to take full advantage of it (their match is pretty much free money!) Lastly, be sure to diversify your investments across different asset classes, such as stocks, bonds, and mutual funds. Talk to an advisor today to see how you can get started or see how they can help your current investments!
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- https://www.investopedia.com/terms/d/debt-avalanche.asp
- https://www.nerdwallet.com/article/finance/what-is-a-debt-snowball
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.