8 New Year’s Financial Resolutions For 2021
Making New Year’s resolutions seems like a cliche of sorts – just how many people stick to their goal of getting fit? That being said, this is still a great time to do some deep introspection and figure out if there are ways you can achieve more and find new ways to enhance your life.
Case in point: actually sticking to New Year’s financial resolutions. Making relevant ones can help you get that much closer to your financial goals. Whether it’s saving money for your dream home, increasing the amount of money you have in your emergency fund or retirement account, taking the time to come up with a few thoughtful resolutions is a game changer.
How Do You Set Financial Resolutions For The New Year?
You can prepare for the rest of this year by taking control of your financial goals. To start, look at where you currently stand in your finances to figure out areas you want to improve.
For example, maybe you notice that your emergency fund only has a few hundred dollars and you want to boost that amount, given that the job market isn’t exactly stable. Or you want to buy a house but aren’t sure how much you’ll need for a down payment. These are great reasons to set a savings goal.
When it comes to finally creating your financial resolutions, getting specific is best. That way, you’re more likely to stick to them because you’ll know exactly what you’re aiming for and when you’ll have reached your goal.
From paying down debts to creating an emergency fund, read on to learn seven New Year’s financial resolutions to help jumpstart your 2021.
1. Set A List Of Financial Goals
Writing down goals you want to achieve is the first step in making them happen. However, your list should be well-thought-out instead of being something spontaneous. Otherwise, this list will sit hidden in a drawer, never seeing the light of day again.
Instead, start by looking at your goals and breaking them down into smaller (and manageable!) chunks, like weekly, monthly, quarterly and then annual goals. If you’re unsure of where to start, look at any financial goals you set last year and weren’t able to achieve. For example, you weren’t able to pay off a certain amount of debt. You can use this as inspiration to break down that goal into smaller chunks to make it more attainable.
2. Make (And Stick To) A Monthly Budget
Creating and sticking to a budget can feel cumbersome and even a bit boring, but it’s a crucial step to your financial success. If you’ve tried and failed in the past, it doesn’t mean you’re not good at it. Rather, it could mean that you’ve chosen a method that doesn’t allow any breathing room or one that doesn’t work well for your personality.
Making a budget starts with tracking your spending so it can be as realistic as possible. Start by grabbing your credit card and bank statements from the last few months to get a good idea of your spending habits. Once you do, then you can create realistic goals, whether that’s decreasing spending in certain categories to increase your long-term savings goals or mapping out special events like birthdays so you can set aside money each month for them.
As for sticking to a monthly budget, accountability is key. Some find success by working with a partner like a close friend or family member. You could keep each other accountable by holding regular check ins and discussing your progress and setbacks. Others may find technology to be the best partner. Budget apps that send notifications when you’re getting close to your spending limit can be extremely helpful.
3. Prioritize And Pay Down Debts
Popular financial experts recommend making a plan to prioritize and pay down your debts. Whether that’s personal loans or your mortgage, doing so will help ensure that you’re on top of your bills and then some.
There are different ways to pay down multiple debts, some of which include getting a debt consolidation loan to simplify payments, making additional monthly payments toward the loan with the highest interest rate, or toward the one with the smallest balance.
If you’re struggling with figuring out what to prioritize or you’re feeling really overwhelmed with multiple debts, it’s a good idea to consult a financial professional who can walk you through your options.
4. Review Your Credit Report
Reviewing your credit report on a regular basis is important because you want to monitor for any signs of identity theft and ensure all the information is correct. Your credit history is housed within this report, detailing items such as any open or closed accounts, payment history and other information that affects your credit score.
Even if you’re not going to take out a loan any time soon, keeping an eye on your score ensures that when you do, you’ll know where you stand.
You can get a copy of your credit report from all three major credit reporting agencies — Equifax®, ExperianTM and Equifax®. To get them for free, head to AnnualCreditReport.com.
5. Pay Off Credit Cards
Like prioritizing your other debts, you should work on paying off any outstanding credit card debts as soon as possible. Creating a repayment plan is key to helping you stick to this New Year’s financial goal.
To start, grab all your credit card statements to see how much you owe then look at your budget. See if there’s any way you can cut back temporarily on parts of your budget and use it toward making more than the minimum monthly payment on your credit card balance.
If you want to simplify your payments and save on interest, you can consider a credit card consolidation loan. This type of loan gives you a lump sum payment to use to pay off all outstanding credit card debts. You’ll then have one payment through one lender. In some cases the interest rate is also lower than a credit card, but it will depend on factors like your credit score.
6. Audit Finances To Evaluate Spending
Auditing finances is an important part of budgeting and ensuring that you’ll meet your financial goals. While everyone’s spending priorities are different, it’s useful to assess whether your current habits are adding value to your life. Many people tend to find areas to cut back after further examination.
To start, look at spending on nonessential purchases like memberships, subscriptions and dining out. Since most of your budget goes toward housing, food and transportation, see if there are ways to cut back in those categories.
7. Create An Emergency Fund
An emergency fund is cash you set aside in a savings account in case of unexpected emergencies — think unplanned medical procedures, your car broke down, or you lose your job. Having money to be able to keep a roof over your head during tough times should be one of the main New Year financial goals to strive for.
As for how much to have in your emergency fund, consider how much you’ll need to pay for the basic necessities for a few months. That being said, saving thousands of dollars within a short span of time isn’t realistic for most people. It’s fine to start small and work your way up to higher amounts of savings. You can even see if you’re able to temporarily cut back on some expenses to jumpstart your emergency fund.
8. Update Your Retirement Savings Plan
Even if retirement isn’t on the horizon anytime soon, reevaluating and updating your retirement savings plan will help you see whether you’re on track. Maybe you got a raise or want to balance your portfolio based on your risk tolerance. Taking the time to examine your savings contributions and portfolio will reward you for years to come.
Setting New Year’s resolutions isn’t just about how many items you can tick off on your to-do list. It’s meant to improve your financial health. While there are many goals you can strive for, make sure you set ones that are both realistic and achievable.
Cutting back to support these goals might feel hard temporarily, but knowing that you’ve stuck to a budget, can finally afford to buy a home, and on track to having enough during retirement will be well worth it.
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