5 Worthy (and Doable) Financial Resolutions
As one year wraps and we look to the next, many people make New Year’s resolutions that focus on enhancing some aspect of their lives. If you enjoy this annual tradition, consider improving your financial situation. Wouldn't you love to look back this time next year with a bigger nest egg or even most of your debt paid off?
Below are five financial resolutions to consider that can help you create a financial picture that enhances your life.
1. Improve your credit score.
A good credit score opens up a world of possibilities, often including lower interest rates on loans. But if you're in the habit of maintaining balances on your credit cards or have had trouble paying bills in the past, your credit may have taken a hit. Fortunately, it's possible to raise your credit score with focused effort.
Start by reviewing your credit report and taking action to fix any mistakes. Then, identify what factors may be dragging down your score. It could be late payments, maxed-out credit accounts or frequent credit checks. Once you identify what needs improvement, you can begin to work on a game plan to rebuild your credit.
2. Pay off at least one debt.
Carrying debt can weigh on you mentally and harm your credit score, holding you back from progressing toward various life goals. Why not focus on paying a significant amount of your debt down in 2024?
The key is to start with a plan. First, consider how you can reign in unnecessary spending to divert more funds toward increasing your debt payments. Then, commit to making all minimum payments while aggressively paying down one debt at a time. This strategy can help you gain exciting momentum that keeps you focused throughout the year. To decide which debt to focus on first, choose either your smallest debt or your debt with the highest interest rate, as recommended by proponents of the snowball and avalanche debt payment methods, respectively.
3. Save an emergency fund.
It may not feel exciting, but saving money in an emergency fund can help you stay out of debt when unexpected expenses arise. Having a stash put away can also protect you from taking a credit hit if you lose your job without notice by helping you pay bills while searching for your next role.
Experts recommend saving enough money to cover at least three months' worth of regular expenses (six is better). Not sure how to get started with saving? Look for ways to cut your spending and boost the amount you put away. These changes can be temporary—until you save your desired amount—but don't be surprised if you start to enjoy the freedom that building good, long-term financial habits can give you.
4. Automate retirement savings.
If you're happy with your present financial picture, it's time to look out for your future. If you haven't yet done so, set up a retirement account. Common types include an individual retirement account (IRA) and a 401(k) with your employer. Your next step should be automating retirement contributions.
Make room in your budget to add a specific amount to your retirement account(s) every month. Once you know how much you can set aside each month, set up an automatic deposit either with your employer's payroll or via an automatic transfer from your bank. When regular retirement contributions are part of your budget, you can sit back and watch your retirement savings grow. Learn more about retirement planning at every age.
5. Start investing.
If you feel you've got the basics down when it comes to your finances, it may be time to take things up a notch—especially if you consistently have extra money after paying your bills and saving for retirement. Start investing to grow your wealth.
First, consider your financial roadmap, including any goals for which you need to save, such as making a significant purchase or paying for a child's education. Then, consider how the timing of those goals affects your risk tolerance before choosing your investment types and opening investment accounts. If investing feels too intimidating or time consuming, look into robo-advisors or apps that simplify investing. You may also consider working with a financial advisor for help and advice.
Making and achieving a financial New Year's Resolution can improve your life for years to come. By this time next year, you could be thanking yourself for making the change.