Some people love the new year. It’s a fresh start, a chance to make goals and stick to them. For others the very idea of a resolution is so daunting that setting any goals, financial or otherwise, at all feels like a recipe for failure.
The reality is that whether it's January 1st or May 12th, the power of change lies in your hands...and your habits! Keeping your financial resolutions is easier than you think—much of it is mind over matter and being diligent with what you have, even if you feel you’ve stretched your dollar on a monthly basis already. Read on for our tips—and let us know what you’re working toward in 2017!
Resolution 1: Start a rainy day fund.
47% of American adults surveyed say they can’t cover a $400 emergency. 55% of American households can’t cover a month’s worth of lost income. Having a basic savings account is Financial Fitness 101, yet many of us simply aren’t saving. Fortunately, there are a few ways you can shore up your cash on hand quickly, so you’re covered in case the unexpected happens.
How to Keep It: Download an app like Qapital and start saving automatically. Try creating an Emergency Fund that’s equal to a month’s worth of living expenses. Then set your “rules.” The app will round your purchases to the nearest dollar, depositing the change into the savings goal you designate—but you can also set a rule to save a specific dollar amount per week.
Want to save without an app? Try the 52-week challenge, in which you save $1 the first week, $2 the second week, and so on. You’ll have $1,378 by the end of the year if you begin now!
Resolution 2: Get out of Debt.
Whether it’s student loans or credit cards, owing money never feels good. In addition to taking a substantial bite out of your monthly income, and with interest, it feels like the balance isn’t shrinking enough, and you end up paying more the longer you take to pay it down. This year, make a sizeable reduction of your debt and be well on your way to financial freedom.
How to Keep It: First, get real about what you owe. Add up each loan and credit card balance and know exactly what you’re working toward. Then, take a deep breath! It’s OK if you can’t pay it all off this year. The actual goal is to make smaller, reasonable steps toward being debt free.
How you choose to pay off your debt is up to you. While research has shown that the snowball method (pay the smallest debt first, then the next and the next) is more effective than other payment methods, because you feel successful quickly and will be motivated to keep paying off debt. There are other ways to approach it, however, and your specific situation should determine your plan.
You might decide on a specific amount to pay each month if you only have small, low-interest credit card balances or a small low-interest loan. Another method is to move your credit card balances with the highest interest to a low or no-interest card if you qualify—especially important if you have a very high interest rate, which can hinder your progress. Be sure to read the fine print on any offers that come in the mail, and talk to a banker or financial planner if you’re uncertain.
Finally, to make sure you are moving toward your goal of being debt free, stop using your credit cards. Remove them from your wallet and any websites where you have them stored as methods of payment. That way, you’ll start to see some real results!
Resolution 3: Save for Retirement
We’ve all seen that commercial that shows the gap between when we should start saving for retirement and when we actually begin…the reality is that not keeping resolutions 1 and 2 above, over time, rob us of our opportunity to save for the future. And women especially need to shore up for retirement—we typically live longer and are 80% more likely to be impoverished at retirement age than men. If you haven’t begun planning for retirement yet, 2017 should be the year you do.
The good news? You don’t need to be earning a ton of money, have a lot of investment knowledge, or create a fancy financial plan: Saving can begin with simple and easy steps.
How to Keep It: It should go without saying but if your employer offers a 401K or 403b, set aside as much of your paycheck as you are able into a retirement account, and take advantage of any matching your employer offers.
Even if you can’t do a standard 10% a lower percentage will get you going. If you’re a freelancer or you don’t have an employer option, an app can make investing easy for the newbie. Acorns takes your spare change and helps you build a portfolio based on your goals. Have a little more to invest? Open a Roth IRA or start an investment portfolio with a certified financial planner.
Nerdwallet is a also great resource for basic information, and their retirement calculator is a good first step if you don’t know where to begin or how much you’ll need to retire.
Are there any financial resolutions that you have that we missed? Let us know in the comments below and we will address them in a future post!
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