4 Financial Goals for the New Year

With a new year comes increased resolve to replace some bad financial habits with good ones that will keep you on a path toward financial security. Despite where you may be on your journey, there has never been a better time than today to make some achievable financial goals. So, what are you waiting for? Let’s get to it! Here are four goals you can work on this year to create the financial future you deserve.

1. Make and Stick to a Budget

Living on a budget isn’t about having a pretty good idea of where your money is going, but detailing and prioritizing how you want your cash to be used each month before it is gone. Creating a budget that works takes time, but if done correctly it will be your first step toward reaching both your short-term and long-term financial objectives.

Start by keeping track of all of all of your expenditures for three months. This can be tedious, but very eye-opening. Three months of careful tracking will give you a good estimate of just how much and where you spend your money during an average month. Next, account for all the after-tax income that you bring in that will be used to pay for your expenses and build your savings. Remember, your savings is an essential part of your monthly budget.

Create your monthly budget by categorizing your expenses and giving each of your incoming dollars a purpose.  You will find that budgeting necessitates prioritizing your needs from your wants and adjusting your spending accordingly. If your income or expenses are irregular, make the necessary changes to your budget each month to accommodate for the fluctuation. Again, make sure you count for every dollar and the way it will be used no matter what your income.

Make sure you prioritize saving in your budget. Experts recommend saving between 10%-20% of your income.  This amount should be divided into both long-term retirement and short-term savings. This can best be accomplished by setting up an automatic transfer into your retirement account as well as a savings account – separated from your checking but easy to get to.  Keep track of your expenses using our budgeting calculator, as well as other online budgeting tools and apps often available without cost.

2. Build an Emergency Fund

Don’t go another month without building up an emergency savings. Whether it is an illness, accident, loss of a job or another unforeseen emergency, having a cushion in the bank will keep an unfortunate event from becoming a financial crisis.  Focus your efforts on getting a quick $500- $1,000 saved up and stashed away into an account you can easily access. This can be done relatively fast by selling items you no longer need, squeezing money from the unnecessary spending categories in your budget (i.e. going out to eat, online subscriptions, gym memberships), and/or getting a side hustle.  After setting aside your short-term emergency fund, determine when to increase your savings to include 3 months of your income.

Since fully funding your emergency savings will take time, determine in your situation whether you should pay down your debts or make saving more money your first priority.   Whatever the case, do not use your emergency fund for anything other than an emergency. Most expenses such as new tires for your vehicle or replacing an old appliance are items that can be planned and saved for. Living on a budget will help you build up both your short-term savings for those extra expenses, as well as fully funding your emergency fund.

3. Increase Payments on Your Credit Card

Make it a priority to pay off your entire credit card debt this year.  Time is not your friend when it comes to paying off your balance. With high interest rates, late fees, and other penalties, a relatively small balance on a credit card can turn a pesky monthly payment into a bruising and expanding debt in no time.

Unfortunately, the average American household’s credit card balance of approximately $5,700 is more than just an inconvenience, but a liability that keeps you from reaching both short-term and long-term goals.  Assuming an interest rate of 18%, applying only the minimum payment to this debt, a person could expect to pay nearly $5,000 in interest alone over the course of the nearly eight years it takes to pay off the loan. Finding ways to squeeze more money from your budget to pay off your credit card will not only help you pay off your debt faster, but will allow you to use the money toward opportunities to invest or save for other important goals.

4.  Save Early for Retirement

It is no secret that the earlier you start saving for your retirement, the more time your money has to grow through compound interest. Starting retirement early can mean the difference between retiring early, or working well past your desired retirement age. It also means you have to invest less money than your counterparts who started investing later in their careers with less time for interest to accrue. The longer you wait, the more money it takes from your earnings to achieve your goals. However, if you are late to the savings game, now is the time to start. Find out how much you need to invest each year to have a comfortable retirement.

If you are unable to invest now or contribute toward your company sponsored plan, then carefully determine the quickest way to make it happen. Since most companies only match funds on the contributions employees make, its crucial to earnestly make the necessary budget adjustments to at least put money toward the company match. If you do not have a company retirement plan, consider investing in a Roth IRA which allows for tax -free growth on your investment.

Whether you work on these goals, or you have other financial objectives you want to achieve, begin to make the small adjustments needed to have success along the way. Remember that a well thought out plan executed with discipline is the formula for achieving the life you were meant to have.