After the merriment and inevitable decadence of the holiday season, the New Year is the perfect time to “recalibrate” your life. While common New Year resolutions typically involve losing weight, getting fit, or nixing a bad habit, consider also making a resolution to get your finances in shape for the coming year.
Financial Resolutions for the New Year
Every year Americans become obsessed with creating New Year’s resolutions. Creating New Year’s resolutions is not difficult; it is the mundane challenge of acting upon these resolutions over an extended period of time that causes most people to fail. So, how can YOU make this new year different?
Below are some tips to help you make 2020 financially successful:
- Don’t bite off more than you can chew. Set initial resolutions that are easier to achieve so you can get some “wins” under your belt. Think of what you spend money on each day – what could you easily do without? If, for example, you have cable television and hardly ever watch TV, go ahead and call the cable company and discontinue your service. If you discover you don’t miss watching TV it may prompt you to think of other items you could possibly do without!
- Build a cash reserve fund only to be used for an emergency. As an example, if, in your lifetime, you have never been able to save a $1,000, make a plan that breaks things down into smaller dollar amounts. In this case, divide the $1,000 into 50 weeks, which equals $20 per week. Then, break this down into a daily amount. Positively reinforce this in your mind each morning by saying to yourself, “I can easily save $3.00 today,” and then make it a daily habit to actually put $3.00 into a piggy bank or a savings account. At the end of 2020 you will have over $1,000 saved!
- Create a plan to discover where your money goes each month. Take an hour to determine everything you spend money on in a day, in a week, in a month. (Our Home Budget Calculator is a great tool to help keep all this info organized!) This will include everything from a car payment to morning coffee. Add all of these items up for the month. Does this amount exceed your income? If so, what items can you remove or reduce? Studies have shown that just knowing where your money is going each month helps you feel better about yourself and contributes to making better financial decisions.
- Create a spending plan for your money. Prioritize all of your expenses by ranking them by greatest importance. For example, food and shelter are normally expenses at the top of the list – everything else will follow. Think about each item and how much value you place on each item. What could you possibly do to reduce the amount of dollars you spend on housing? On food? On your car? If there are feasible options to reduce your expenses, go ahead and develop a plan to make it happen. If you don’t feel comfortable making a decision on your own, seek a reputable family member, friend or trusted advisor to help you with the process.
- Celebrate your wins. Once you meet a goal you have written down, reward yourself (with a fiscally-correlated reward). Let’s say your goal is to pay off the balance on your credit card(s) (Our Credit Card Payoff Calculator can help you get started!). Once you’ve paid down the balance by a certain amount, OR paid off the card completely, reward yourself with a cup of Starbucks (or your favorite hot beverage).
We wish you a Happy New Year and also wish you much success in 2020. If there is anything we can do to help you in this upcoming new year, please ask – we are here to help.
Gary L. Popkes, CFP®
Senior Vice President