With the new year quickly approaching, it's a good time to reflect on the past year and set some goals for the next. But whether or not you believe in setting New Year's resolutions, it's wise to review your finances and make sure they're in good shape for the year ahead. New Year's resolutions can be difficult to follow, but setting some simple financial goals will help you stay on track with your finances and promote monetary security.
If the word “resolution” sounds intimidating, think of it as an intention, suggests Brittney Castro, a certified financial planner at Mint. “With intentions, the idea is to be clear about your vision and what you want for yourself in the new year in all areas of your life,” says Castro. “It becomes more about creating lifestyle changes rather than feeling pressure to be perfect and restricting yourself from reaching your resolutions.” Whatever your intentions for your money, here are some steps to take to set yourself up for financial success.
Review your assets
Retirement Savings
“If you are in your twenties or close to retirement, you should take time at the beginning of the year to assess whether you are on track to have the amount you need to live comfortably at your desired retirement age. , accounting for factors such as inflation and rising medical costs,” says Kristen Dillard, vice president of project management at Acelerar.
Insurance policies
Review all homeowner, renter, auto, disability and life insurance. Are the limits appropriate? Should deductibles be increased? Is there a cheaper policy with similar coverage? Are you taking advantage of all the discounts offered by your insurers?
credit report
Get a free copy of your credit report (the numerical summary of how much you owe and how quickly you pay your bills, which is scrutinized by everyone from lenders to landlords) from annualcreditreport.com.
Investment Portfolio
Making sure your asset allocation aligns with your investment goals is an essential part of managing a portfolio. The beginning of the year is an opportune time to do so, and the process can only take a few minutes. “Take steps to build your wealth by investing in your financial future through the stock market, real estate, or cryptocurrencies – and finding ways to increase your income,” suggests Castro.
Experiment with budgets
Whether you use an online money management app or platform (like Accelerate or Mint), or good old pen and paper, you need to know where your money is going. Divide your expenses into categories – utilities, insurance, entertainment, clothing, etc. – to identify where you can cut back.
Budgeting can help you better track your spending and see the bigger picture. “For example, by directing your monthly income into one account to pay your commitments – your bills, debts, savings goals and donations – and keeping a separate account to use for spending money, you can minimize your daily decision-making. with just one account balance in mind,” says Renato Mazziero, vice president of digital and design at financial services organization, Economic.
Set short- and long-term financial goals
Whether you want to be debt-free in 10 years or own a home in five, you're more inclined to save if you have specific goals. So write them down and determine how much money you will need to save each month to achieve them.
“Small goals, like increasing your monthly credit card payment instead of just paying the minimum or cutting out unused streaming services, can make a big difference,” says Mazziero. “Repeat and improve on these types of smaller but consistent steps.” Keep your financial goals reasonable and you'll be more likely to achieve them.
If your goal is to become debt-free, start by paying off bad debts, like high-interest credit card bills and non-tax-deductible debts. While you're at it, sign up for automatic bill payment programs when you can. You'll avoid costly missed payments, late fees, and negative marks on your credit score.
Increase your Savings Account
Create a regular savings plan. Set up direct deposit of your paycheck into a savings account – you won't miss out on money you never see. “Automatically saving a specific amount each month is one of the best ways to build financial stability,” says Mazziero. Why? “Because people are often their own worst enemies when it comes to money and spending,” he explains. The “set it and forget it” method will allow you to keep your spending under control and increase your savings.
Increase retirement savings
If you can't max out your employer-sponsored 401(k) or SEP plan this year, try to contribute enough to receive the full company match. If you don't have a retirement plan at work, fund a traditional IRA or a Roth IRA and arrange for contributions to be made automatically from your checking or savings account.
Make (or update) your will
Get your estate planning in order. This ensures that your personal belongings, assets and investments go to the beneficiaries you choose. In addition to building wealth, it is important to protect it as well.
Increase your emergency fund
Make sure you have enough money in your savings account. Aim to save 6 to 12 months of living expenses so that in case of an emergency (job loss, unexpected medical bills) you won't have to sell assets or rely on credit cards.
