Having New Year’s financial resolutions can help you become more financially secure in the upcoming year. Here are some financial resolutions you can set for 2020.
In this article:
- Read About Personal Finance
- Write down Your Financial Goals Daily
- Focus on Money Management
- Start and Follow a Budget
- Map out Your Main Financial Goal for the Year
- Decrease or Eliminate Debt
- Optimize Your Retirement Savings
- Have a Rainy-Day Fund
- Become More Strategic with Money
9 New Year’s Financial Resolutions for a Richer You
1. Read About Personal Finance
Financial stability comes from making mature financial decisions and personal discipline. While discipline will lead you to your goals, having good strategies and accurate information can make the journey easier and shorter.
If you want to learn about personal finance, you can:
- Read personal finance blogs that talk about where you’re at financially. If you’re saving for retirement, look for blogs that focus on talking about how to build a nest egg for retirement. If you’re a newbie in investing, you can search for blogs that talk about the basics of investing.
- Watch videos about how people have reached financial stability. Be inspired and motivated by these success stories.
- Talk to experts. You can also turn to finance experts since they can give you detailed and specific action plans to minimize expenses.
2. Write Down Your Financial Goals Daily
Writing down your daily financial goals can help you:
- See your progress financially;
- Provide insights about your spending; and
- Give accurate information about your priorities.
For example, you can write that you’ll only spend a certain amount on lunch in a day. Then, list down your actual expenses and compare your actual to your ideal.
Having long-term financial goals is essential to financial freedom. To achieve those goals, you’d have to accomplish short-term goals that compound over time.
- You want to save $10,000 for the year, but it sounds difficult.
- Try saving $30 a day. If there are days when it doesn’t seem possible (e.g. an unexpected expense makes you spend higher on a certain day), just adjust your savings on another day to compensate. After a year, you’ll have more than $10,000 saved up.
3. Focus on Money Management
Here are some ways you can improve your management skills:
- Record your cash movements. The record can be as simple as writing income and expenses. You can also use an app.
- Allocate your money beforehand to avoid overspending on one thing and coming up short for another. Don’t forget to add money for entertainment so you don’t burn out.
- Find out how much you “really” need for living expenses. Prioritize your needs (e.g. bills, utilities, car payments, etc.) over your wants. From there, figure out where you can cut back on without compromising your quality of life.
- Allocate some money into savings. A good rule of thumb is to have enough savings for six months.
- Have some money for your investments. This can be your Roth, Traditional IRA, 401(k), or personal portfolio.
4. Start and Follow a Budget
Setting a budget makes you prepared and allows you to forecast possible expenses. If you don’t have one yet, starting a budget should be a New Year’s financial resolution since it’s a crucial step that’ll dictate your financial health for the year.
If you haven’t started a budget, you may want to:
- Prepare your records, whether digital or physical. An Excel spreadsheet can be helpful since you can easily add formulas to automate debits and credits.
- Start small by documenting daily and weekly cash flows. Make it as detailed as possible, but you need income and expenses as the bare necessity.
- Understand that a budget is flexible, and it’s fine to make mistakes. If you didn’t follow your budget for a certain day or week, adjust your budget later on so it still balances out.
Once you’ve set your budget, do your best to follow it. Aside from having an Excel spreadsheet, you can also turn to budget tracker apps, which can remind you to track your daily expenses so you don’t forget.
5. Map Out Your Main Financial Goal for the Year
Having one big financial goal for the year should be a New Year’s financial resolution. Just make sure it’s attainable based on your current income so you won’t get into debt just to achieve it.
To help you stay motivated, you can print out a picture and place it where you’ll always see it. For example, if you’re saving up for a new car, add a picture of the car you want in your work area or stick it to the fridge.
6. Decrease or Eliminate Debt
Because of compounding interest, the longer you don’t pay off your debt or loan, the higher the interest and the higher the amount you’ll have to pay in the long run.
Trying to minimize debt will give your future self a lot of leverage. Debt, especially the interest, can eat at your savings and investments, and you’ll be trapped in debt for a longer time.
Here’s how to combat the effects of compounding interest:
- It’s highly recommended to pay off high-interest debt before you start investing. Better yet, if you can refinance to a lower rate, you should.
- Before doing anything, try to talk to an expert first to minimize any surprises. They may be able to guide you on the best course of action that’ll lead to lower payments.
- If you have any tax refunds or other unexpected income, you should think about paying off loans first.
There are some exceptions to this rule, like having an investment that outpaces the interest rate.
There may be some charges for paying off debt or other tax considerations so make sure you’ve planned out your actions before paying off anything.
7. Optimize Your Retirement Savings
Maximizing your contribution limits for your IRA or 401(k) allows you more start-up investment. The earlier your investment, the higher the returns you’ll get as the growth rate applies to the whole portfolio, not just the capital.
Any contributions can be tax-deductible if you qualify, which can lower your tax bracket and net tax expenses. The earlier you start contributing to tax-advantaged accounts, the better your financial future can be.
8. Have a Rainy-Day Fund
A good rule of thumb for saving is to have at least six months’ worth of living expenses saved up for emergencies. This six-month savings account should be separate from your investment funds.
If you can forego some of your expenses to increase your rainy-day fund, do it.
9. Become More Strategic with Money
Having a strategic mindset when it comes to money is easier said than done. When buying, ask the question, “Is this really necessary?” so you can decide more logically rather than emotionally.
Here are other questions you can answer before spending on anything:
- Is the price worth its value?
- Are there any similar products or services?
- Can I find a better price or value?
- Can I wait for a better time to buy it?
- Can I spend or invest this money on a different asset, service, or product?
These nine New Year’s financial resolutions can help you focus your resources and time properly. As long as you choose the right financial goals and strategies, you’re on the right track to becoming more financially secure in the upcoming year.
What New Year’s financial resolutions are you setting for 2020? Share them with us in the comments section below.