New Year’s resolutions come in every shape and form. You may want to hit the gym a little harder, build up your reading list, or even learn a new language. While those are great, we often overlook financial resolutions in favor of flashier ones.
But if you’re considering a monetary revamp, you’re not alone. Over half of Americans over the age of 18 considered financial goals for their 2021 New Year resolutions, according to a Fidelity Investment study. Here are some ways to start your own in 2022.
HOW CAN I RESET MY FINANCES FOR A NEW YEAR?
Resetting your finances might require starting from scratch. One of the best ways to get a head start is to find some educational material. There is a wide range of resources that offer basic advice and guidance for people of all ages. You can find courses, activities, and content that go into anything from paying down debt to investing.
Some resources include the Consumer Financial Protection Bureau (CFPB)’s site, podcasts like Millennial Money, and programs such as 360 Degrees of Financial Literacy.
After you have a foundation, you can begin planning the changes you want to make. That will require sitting down with your finances, making goals, and plotting ways to fulfill them. If you’re lost, you can always talk with a knowledgeable financial advisor.
WHAT FINANCIAL RESOLUTIONS SHOULD I CONSIDER?
If you want to improve your present financial situation, there are plenty of pathways available. However, it can be hard to find your direction sometimes. Here are a few resolutions worth considering that you can use as starting points:
- Setting a Budget. Knowing your spending habits is the first step to fixing them. If it’s hard to plan too far ahead, try out a weekly budget at first. It’s easier to monitor, and you can use it for a monthly budget later on.
- Creating Goals. Everything’s harder without motivation. While this resolution might not have a specific financial action tied to it, it’ll lead you to one. Giving yourself something tangible to work towards will support sustainable change and progress.
- Improving your Credit Score. Credit scores factor into some of our biggest milestones, like buying a car or a house. By paying your bills on time and in full, you can steadily work towards a higher score and prepare for those big purchases.
- Paying Bills on Time. It sounds simple enough, but it’s surprisingly easy to fall behind on your bills. Most charge late fees once you do, making it hard to escape the cycle of debt. This year, try to hunker down and organize your debts with a repayment plan in mind.
- Saving for Retirement. It’s never too late to start saving for retirement. You may even already have a plan, such as an IRA or a 401(k). Regardless, revisit your goals for the future this New Year. It might involve capping out your yearly contributions, taking advantage of employer matching programs, or revising your timeline.
- Make an Emergency Fund. Rainy days can hit sooner than you think. By planning for the unexpected, you reduce your chances of debt when disaster strikes. Generally, experts and sources like Vanguard recommend that a fund cover around 3 to 6 months of living expenses at a minimum.
HOW SHOULD I PRIORITIZE MY FINANCIAL RESOLUTIONS?
Remember: everyone’s situation is different. So, you’ll probably need to focus on certain changes more than others. Think about it: what do you currently struggle with when it comes to money? The areas that impact you most should take priority.
You likely won’t get to every single one, too. Choose a strategy to address them. Maybe you chip away at the smaller ones so that you can put all your attention on the bigger topics. Or, perhaps you work solely on the most detrimental issue, like debt, so that it doesn’t continue to snowball. Again, if you’re struggling with a plan, don’t be afraid to consult a financial professional with the right tools to guide you.