The new year gives you the opportunity to make a fresh start on your goals and ambitions. Some people focus on “losing weight” or “exercising more.” But what if you focused on your finances?
These seven simple resolutions can get your finances started off on the right foot and put your mind at ease in the new year.
1. Set Financial Goals
Goals are the first step to making a change. Do you remember the last time you set financial goals?
I’m not talking arbitrary goals – but real goals that you can set and achieve. If it’s been a while, the new year is an excellent time to revisit your goals and create a financial wellness plan.
Think about what you want to achieve both short-term and long-term. You might set a short-term goal to save for a car, take a vacation or build up your savings for the down payment on a house.
Long-term goals are further into the future, but they require consistent steps to make them happen. For example, saving for retirement or for your child’s college education are long-term goals that can be accomplished in smaller increments.
2. Create and Use a Budget
Budgets need not be scary or overwhelming. Think of a budget as a roadmap for your money: if you don’t tell it where to go, who knows where it will end up.
Creating a budget is one of the most important tools available in your financial toolbox.
It doesn’t have to be fancy. Write your income and expenses on paper and set spending limits for each category. You could also use a spreadsheet or download a budgeting app for your smartphone.
Remember, there’s no right or wrong way to make a budget, as long as you account for all of your income and expenses.
For a little guidance, you might try the 50/30/20 budget. This is where you set aside 50% of your income to fixed or essential expenses such as your mortgage and utility bills, 30% for variable costs or wants like clothing and entertainment and 20% for savings goals or debt payoff.
Once you create your budget – use it! It doesn’t do you any good to let it sit there. Revisit your budget often and decide if it’s working for you. If not, make changes until you find a budget that fits your needs.
3. Check Your Credit Report
One in five people has at least one error on their credit reports, according to the Consumer Financial Protection Bureau. Mistakes can lower your credit score, which can cost you substantially more in interest fees over the years.
Thanks to the Fair Credit Reporting Act, you get a free copy of your credit report once per year. Take advantage of the free access to review it for errors.
Check your reports from all three major credit bureaus. If you find a mistake, dispute it by contacting the reporting credit bureau in writing.
Don’t forget about the errors you might have made. Did you miss a payment? Bring all late payments up to date. Is your credit line overextended? Pay your balances down as fast as you can.
4. Buy Life Insurance
Almost everyone needs a life insurance policy. If you don’t have one, the new year is an excellent time to check it off your to-do list.
There’s likely someone who depends on your income. Whether you’re providing for your spouse or dependents, or you want a policy to cover your final expenses, life insurance can be an affordable solution if the unthinkable happens.
How much you need depends on several factors. Use our Needs Assessment Tool to discover how much life insurance you should have. You can get a quote without entering your email address or phone number, so there are no strings attached.
5. Make Regular Retirement Contributions
No matter your age, it’s never too late to save for retirement. The earlier you start and the more consistent your contributions, the better off you’ll be in your golden years.
The new year is the perfect time to revisit your retirement goals. If you haven’t set up a retirement fund or it’s been a while since you’ve contributed, resolve to start regular contributions.
Check with your employer – many offer a 401K plan and will match a certain percent of what you add to the fund. The money your employer contributes is like free money, so don’t leave that on the table.
If you work for yourself or have already maxed out your 401K, consider opening an IRA.
6. Create a Last Will and Testament
While no one likes to think about their death, it’s best to prepare in advance for when that day finally comes. You hope to live a good, long life. But tomorrow isn’t promised.
A last will and testament can make sure your wishes are carried out. You can name a guardian for your children if you pass away while they’re still minors and specify how you want your belongings divided.
Without a will, the state has the authority to distribute your assets according to law, and your valuables may not go to whom you had intended. A will gives you a say in who gets your most prized assets and gives you peace of mind that your things are taken care of.
7. Calculate your Net Worth
Net worth isn’t reserved for the wealthy. Everyday people should calculate their net worth. It’s an excellent way to track financial milestones, such as getting out of debt or saving for retirement.
Calculating your net worth can be an eye-opening experience. If you have substantial debt, seeing the number on paper might be the motivation you need to pay it off.
And if you have no debt? See how much you can build your savings to have a higher net worth by next year.
Start your New Year’s Resolutions Today
There’s no rule that says you have to wait until January 1st to start your new year’s resolutions.
Why not start now to get a head start? Pick one or two financial resolutions and see what you can do to make them a reality by January 1st.
Remember: the key to new year’s resolutions isn’t making a list. Real success comes from sticking to it. What are you waiting for? Make next year your best one yet!