Although you can make resolutions at any time of the year, the beginning of the year is always a popular time to do so. The idea of starting the new year off on the right foot and having a new beginning is very appealing to most, and can serve as an inspiration to set goals that will improve our everyday lives. Popular resolutions not only include positive changes to our physical, emotional and mental health (such as losing weight, traveling more, and picking up a new hobby), but it also includes making positive changes to our financial situations.
If improving your financial situation is on your to-do list for the new year, check out these five tips on how to set yourself up for financial success.
1. Prioritize Your Financial Goals
Figuring out what your financial goals are is a great first step to take when wanting to improve your financial situation. To help organize the order of priority, separate the goals by when you think you can accomplish them: short-term goals can be accomplished in less than six months; medium-term goals can be accomplished between six to twelve months; and long-term goals require more than a year to complete. As you’re sorting them into different categories, make sure that you’re being realistic on the time and money it will take to cross off each goal.
2. Create a Budget
After you’ve set your financial goals for the year, creating a new budget to go along with your new goals is the next logical step to take. Budgets can help you determine where your money is going, control your spending habits, and help keep you on the right track to meeting your goals. Budgets can also help you figure out expenses that you might no longer need, which can free up some money to be allocated elsewhere.
3. Pay off Credit Card Debt
Falling into the credit card debt trap is easy to do because credit cards are designed to be convenient. With cash, you can see when you’re running low on funds; but with credit cards, it’s so easy to forget that you’re dealing with real money. Purchases can add up quickly, and you might not realize how much you’ve been using your card until you get your monthly statement. And, due to the high interest rates that are associated with credit cards, we actually end up paying more for things than what we would have paid for with cash.
4. Fund Your Retirement Early
Retirement might seem far away for some of us, but the earlier you start saving, the better position you’ll be in when it comes time to clock out from the working world. Although Social Security can help you with some of your retirement expenses, it’s often not enough. By planning and saving as early as possible, you’ll have the power of compound interest on your side. Depending on the lifestyle you envision for yourself in retirement and when you plan on retiring, these factors will impact how much you’ll need to save for your golden years.
5. Have a Savings Plan
Saving may seem like an impossible task when you’re trying to pay down debt. However, if you pay yourself first by automatically depositing a certain amount into a savings account, you will be less tempted to spend it. Start out with a small amount or percentage of your paycheck, and then increase that contribution as your salary increases or as your debt decreases. These savings can especially come in handy for when an emergency arises. Your future self will thank you later.
