Commitments to a healthier lifestyle and improved finances top the list of New Year’s resolutions. Exercising more and increasing the number of fruits and vegetables in your diet might be the best way to improve health, but figuring out how to achieve financial success isn’t as straightforward.
While it might be tempting to overhaul your finances on January 1, commit to just one action instead of trying to improve everything at once. Start with one of these tips and move toward financial success in the new year.
Establish Savings Goals
Without a savings target, a consistent savings habit can be hard to keep. Before you open a new savings account, decide on a savings goal. Determine the dollar amount and how long you’ll take to reach the goal. You might consider:
- Adding $1,000 to an emergency fund account within 10 months
- Saving $2,000 for a summer vacation before June
- Increasing monthly contributions to a retirement plan by 1%, effective January 1
Monitor your progress towards achieving each goal to make sure you stay on track.
Implement a Debt Reduction Plan
Payments made to credit cards, student loans, medical bills, and other debt can leave you with little money to achieve other financial goals. The more income you have to put toward savings for such things as a down payment on a home, the sooner you can get to the closing table.
A debt reduction plan is an intentional process of paying off debts based on your financial situation and timeline. If you’re behind on payments, catch up on those past due bills before attempting to pay down any other debt.
Depending on your total debt load and income, you could tackle the smallest balance first and then move on to the next largest balance with the goal of having your debts paid off in less than two years. For the plan to be effective, make timely payments on all your debts and do not incur new debt during a debt reduction plan.
Build an Emergency Fund Account
An emergency fund savings account can be the financial lifeline you need should you lose your job or be hit with an unexpected expense. The account should amount to at least three months of living expenses. Since a fully-funded account can take months and sometimes years to reach, consider a variety of avenues to fund the account.
Start with a smaller goal of saving $1,000. Tax refund checks, employee bonuses, or monetary gifts can help you reach your initial goal quickly. Continue to add to the account by trimming expenses, depositing funds from a side job, or by selling unwanted items. The faster you fund the account, the sooner you can shield yourself from a financial emergency.
Revise Your Budget
Your ability to achieve financial success in the new year will largely depend on your budget. When you revise your budget to include your savings goals, it’s possible to achieve financial success in the new year and beyond. Add the savings goal as an expense category in your budget to make sure money gets “paid” each month into that account.
If you don’t have a budget, now is the perfect time to create one. It’s simple when you use a budgeting tool. A budget can help uncover where you might be overspending and how much more you must earn to reach your savings goals.
Ask for a Raise
An increase in income is one of the best ways to achieve financial success in the new year. If you can prove how your work performance has added value to the company, discuss the possibility of a wage increase with your supervisor. Your year-end performance evaluation might be a perfect time.
Be prepared to discuss your performance and your desire for your earnings to keep up with inflation. If successful, use the income boost to fund one of your savings goals. If an increase isn’t possible, consider a weekend job to earn extra income.
Meet with a Generations Financial Advisor
A financial advisor can answer questions about your specific financial situation and review your savings and investment options for 2020. If you’re ready to examine additional financial strategies or need to check the status of your investment portfolio, a Generations Financial Advisor can help. Schedule a free, no-obligation appointment at MyGenFCU.org/Investments.
Prepare for the new year by implementing at least one of these tips. In 12 months, look back at how far you’ve come. You might be surprised at how quickly your finances have improved during that time.