Guiding your life’s biggest financial moments


Top 11 Financial New Year’s Resolutions and How to Achieve Them

2021 is drawing to a close, and that means it’s time to think about resolutions for the year ahead. With the rising cost of goods and services, financial resolutions are at the fore in the minds of many consumers.

With the right plan in place, you can stick to your financial resolutions and end the year ahead in a better place than when you started it.

Here are 11 practical financial resolutions to commit to, plus expert advice on how to stick to them.

1. Refinance your mortgage and / or student loans

Mortgage rates have hit historic lows in recent months, so now might be a good time to refinance to lower your monthly payments, if you haven’t already.

When it comes to refinancing student loans, federal student loans are on hold until January 2022, which means you’ll have to start making payments again soon. Whether you have a federal or private student loan, consider refinancing the loan for lower rates.

2. Pay off credit card debt

A recent study found that 75 percent of adults have a month-to-month credit card balance. Among those carrying a balance, the average amount is $ 5,315.

If you have credit card debt, consider making a goal of paying it off. There are several approaches you can take, but two common strategies are to pay off your highest debt first (the debt avalanche method) and pay off your smallest debt first (the snowball method). debt).

If you’re having trouble making your payments, consider credit counseling, a low-interest balance transfer, a personal loan, or even debt settlement.

3. Can’t stick to a budget? Instead, create a spending plan

If you’re struggling to stay on a budget, consider ditching the traditional budgeting method and creating a spending plan instead, says Loreen Gilbert, senior wealth manager and CEO of WealthWise Financial Services.

“The concept of living on a spending plan instead of a budget can give you freedom and peace of mind,” says Gilbert.

A spending plan lets you choose What you spend your money instead of restricting yourself to what you can not spend. Start by determining your monthly income, then decide which expense categories are most important to you.

As a rule of thumb, start with necessary expenses that include things like housing, utilities, groceries, and savings. After you identify how much you need for these categories, create others where your remaining funds can be spent, such as entertainment and travel.

Money management apps are great tools for knowing where your money is going. Some banking apps offer similar tools.

The end result is the same as budgeting, minus restrictive rules, making it a good strategy for those who don’t like being told what they can’t do.

4. Automate your savings

One of the easiest ways to build savings is to automate contributions, so you don’t have to think about how much money to put aside each month.

Many employers allow employees to divide their paychecks so that different amounts go to different accounts. Another option is to set up automatic transfers between bank accounts. Whichever option you choose, make automating your savings a priority.

5. Create an emergency fund

A recent Bankrate survey found that more than half of Americans have less than three months of spending saved in an emergency fund. But an emergency fund is an important financial tool that can help with unexpected expenses, such as home or car repairs.

The New Year is a great time to start (or increase) your emergency fund. In general, experts recommend saving three to six months of living expenses. Start by opening a separate, dedicated high yield savings account. After that, heed these four tips:

  • Evaluate your spending and find areas where you can save.
  • Set a savings goal.
  • Set up automatic contributions.
  • Try to increase your contributions over time.

6. Boost your retirement savings

Saving for retirement is one of the most important aspects of a good financial plan.

“Use [the new year] to increase or maximize contributions to 401 (k) or HSA, set holistic retirement goals (for example, where am I going to live? Will I work? How much do I budget for travel?) and, regardless of your age or your stage of life, take meaningful steps to improve your financial well-being, ”says Lorna Sabbia, manager of retirement and personal wealth solutions at Bank of America.

There are several ways to increase your retirement savings. On the one hand, if your employer offers a 401 (k) match, be sure to contribute enough to get the match complete, as this is basically free money. Another thing to consider is to watch where your money is being invested. Many experts recommend investing in a diversified portfolio of assets to reduce your risk while achieving attractive returns.

Finally, it’s important to remember that the only way to get the long-term average market return of 10% is to withstand all tough times.

“Your retirement savings will grow faster if you choose a solid long-term plan and stick to it during the good times and the bad, but especially the bad times,” says James Royal, investment journalist and Bankrate wealth management.

Royal says investors should keep adding to the account and not selling, although it may be tempting.

7. Invest more

Don’t limit your investment to tax-efficient pension contributions.

If you already have an emergency savings account, consider setting up an investment account for goals with specific time horizons, like early retirement or saving for a house.

“While it’s great to maximize your tax-efficient retirement accounts – $ 6,000 in an IRA and up to $ 20,500 in a 401 (k) – you will have even more opportunities if you also save in an account. taxable, ”Royal said.

Royal adds that some of the biggest benefits of investing outside of your retirement account include:

  • No limit to what you can save.
  • Benefits of deferral of tax on unrealized gains (stocks you don’t sell).
  • Immediate access to money without penalties or other restrictions.

If you’re just getting started, consider turning to a robo-advisor, who will invest for you after considering your risk tolerance and ideal income.

8. Improve your credit score

A good credit score varies depending on the rating system. For example, FICO considers a good score to be 670 to 739, while the VantageScore scale considers 661 to 781 to be good.

Either way, your credit score plays a vital role in determining whether you have access to the financing and other financial services you need. Your credit rating can determine the amount of interest paid on a loan, for example, and in some states, credit scores are a factor in setting auto insurance rates.

Consumers can get a free credit report each year from each of the three major credit reporting companies, as guaranteed by the Fair Credit Reporting Act. Some credit card issuers and other lenders also give their customers free information about their credit rating. Alternatively, you can choose to purchase your score from one of the three credit bureaus.

To increase your credit score, consider these four tips:

  • Pay all bills on time and in full.
  • Reduce your credit utilization rate.
  • Take advantage of score improvement programs, like Experian Boost.
  • Don’t ask for new accounts too often.

9. Cook more meals at home

Put more money back in your wallet by cutting down on restaurant food. Eating at home can be fun (and easy) with meal subscription services, which give you the flexibility to choose new recipes every week and have the ingredients delivered right to your door.

You can save even more money by cooking from scratch. Find recipes online or ask friends and family for their proven recipes. After a try, calculate your savings and consider spending the extra money on paying off debt or building up your emergency fund.

10. Update your beneficiaries

It’s a good idea to review your beneficiary designations soon after experiencing a life-changing situation.

“If you haven’t reviewed it for a while, or especially if there’s been a change in family dynamics like a marriage or divorce, review the beneficiary designation on your life and retirement accounts. to make sure it reflects your current intentions, ”says Greg McBride, CFA, chief financial analyst at Bankrate.

Also, check your retirement and bank accounts, insurance policies, and other financial accounts to make sure your beneficiary designations are up to date.

Adding a beneficiary to your accounts is essential to ensure that your assets go to the person you want them to have. Beneficiary designations take precedence over wills, so make sure your will and any accounts or policies, like life insurance, are aligned with their guidelines.

11. Look for ways to increase your income

Sometimes it’s less about saving and cutting, and more about increasing your income.

If the pandemic has taught consumers anything, “it’s that life is uncertain and having multiple sources of income is more important than ever,” says Laura Gariepy, business coach and founder of Before You Go Freelance, a blog that offers advice to aspiring freelancers. “People are realizing that self-employment is not inherently riskier than traditional employment because there is income diversification built in when you have multiple clients or clients. “

There are many ways to increase your sources of income. Self-employment, for example, is optimal for those with a specific skill to offer. But there are also less technical side concerns, like walking the dog, to consider. Also, if you have some savings on hand, consider investing in dividend-paying stocks or real estate investment trusts.

By finding different ways to increase your sources of income, you are not completely dependent on one source of income. This strategy can not only help you make more money, increase your savings, and achieve your goals, but it can also offer you some protection if you lose your main job.

Learn more:

  • 5 things people procrastinate on that could ruin their finances
  • Year-end financial checklist: 15 tasks to accomplish
  • 5 unusual year-end tax strategies for investors

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