Financial Resolutions You Should Make All Year Long
The beginning of the new year is an excellent time to review your financial goals and set your resolutions. Financial resolutions can help you successfully reach your short- and long-term goals. Financial goals could include items like going on a fabulous vacation, purchasing a new home or increasing retirement savings.
Curious about how to set attainable financial resolutions? We have a few tips:
- Be Specific - Meet with your financial advisor to review your current financial status, short- and long-term goals. Set clear financial goals for the year. Working with your financial advisor, write a financial resolution that is actionable.
- Set a Budget - Having a budget enables you to manage your money, control spending, save money and pay off debts. Use a budget worksheet to help identify sources of income and monthly expenses. The worksheet will calculate your net income, (what is left over after paying bills) so you can adjust your monthly budget accordingly. Don’t forget about payments you may make irregularly when establishing your monthly expenses, such as insurance, taxes, etc. Establishing a budget allows you to track your spending and easily identify areas to increase or decrease.
- Reduce Debt - Reducing credit card, loans and other consumer debt tends to be a financial priority for most people. According to a Financial Resolutions Study by Fidelity Investments, “25 percent of people surveyed said that reducing debt was their top financial priority for 2018.” Keep in mind that not all debt is equal. Pay attention to the interest rate for each account. Rank debt from highest to lowest by interest rates, so you can pay off higher interest rates first, saving you money in the long run.
- Increase Savings – If your financial resolution is to save more money, you’re not alone. Fifty-five percent of people in Fidelity Investment’s Study said that saving more was their top financial priority in 2018. Automated savings plans are an excellent way to save money. A set amount of money can be automatically withdrawn each month from your checking account and deposited into a savings or investment account to build your savings.
- Close Unused Accounts – Closing old or unused credit card accounts could save you money if they have interest rates or fees tied to them. Closing an account generally requires paying off the balance and calling the credit card’s customer service department. Once you have closed your account, you should receive a confirmation letter within 10 days. If you don’t, be sure to follow up to verify that the account was actually closed. Note that sometimes closing an old account may temporarily affect your credit score, but it will also reduce your exposure to identity theft.
- Establish an Emergency Fund – An emergency fund is a savings account containing money set aside to cover unforeseen expenses, such as medical bills, auto repairs, job loss, etc. As a rule of thumb, an emergency fund should have enough in it to cover three to six months of living expenses. Having some money in reserve for emergencies can mean the difference between weathering a short-term financial crisis or falling deep into debt.
A financial advisor can help hold you accountable for reaching and maintaining your New Year’s financial resolutions. Committing yourself to short- and long-term financial goals is essential for peace of mind and fiscal stability.
Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.
"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.