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Three Financial Resolutions You Need To Keep

Date Posted: Tuesday, January 15th, 2019
Three Financial Resolutions You Need To Keep
There are three main categories of financial resolutions that people typically set in the new year. According to a study by Fidelity, 55 percent of people are looking to save more, 25 percent are looking to pay down debt and 18 percent of people are looking to spend less.
When we take a look at these three general goals, we’re able to see why people fail to stick to their resolutions.

We’re more likely to stick to our goals when they’re rooted in what we value. I know that sounds simple, but a surprising number of people don’t practice value-based goal setting when it comes to their finances. We make resolutions according to our values in every other aspect of our lives, doesn’t it make sense to do the same with our money?

This year, as you work to construct your resolutions, remember to align them with what matters most to you. Whether you’re working toward saving, paying off your debt or organizing your budget and expenses, the easiest way to actually stick to your resolutions all year long is if you care about them. Here are some more ways you can change the tides for yourself.
 
1. Grow your savings

Whether you want more stashed away for retirement or you’re looking to boost your emergency fund, saving more is a phenomenal goal for the new year. So why do people have such a tough time doing it?

What goes wrong

Saving is one of the first financial priorities that gets put on the back-burner when life gets a little bumpy. Bills start piling up, life gets stressful, then you decide you deserve to treat yourself to a vacation in Bali with your bonus check instead of funneling it toward your retirement savings account. Sound familiar?

How you can make it happen

When you want to grow your savings, you need to know your “why.” Too many people start each year by setting an arbitrary New Year’s resolution without thinking about the motivation behind it.
 
When your savings-focused resolutions are rooted in a “why” they’re much easier to stick to.

Let’s say you want to grow your emergency fund. What will having a specific amount in your emergency fund get you? For example, you could estimate that six months of expenses in your emergency savings fund could protect you in the event of job loss, and you know your company is about to go through a round of layoffs, which makes this especially important to you right now.

Or maybe you and your spouse or partner are getting ready to start your family. Estimating the cost of your medical expenses through the prenatal care to when you welcome your little one into the world can make an excellent emergency savings goal to start working toward.
When your savings-focused resolutions are rooted in a “why” they’re much easier to stick to.
 
2. Pay down your debt

Debt is the worst. In all seriousness, debt has some serious psychological effects. Debt restricts our choices. It leaves us feeling anxious, full of self-doubt, and it brings a variety of negative emotions that can manifest as physical pain. That’s right — your debt can make you sick! If that’s not reason enough to get it paid off this year, I’m not sure what is.

What goes wrong

Debt really does a number on our motivation. We make the minimum payments every month, which barely makes a dent in what you owe and can cost you thousands of dollars in interest, or we handcuff ourselves to the original 10-year repayment plan we signed up for. The truth is, even when we want to pay down our debt, there’s always going to be another way to spend any “extra” funds in your budget – you have to make debt repayment a priority.

How you can make it happen

Debt repayment is all about having a strategy. When you have a plan in place and you’re able to automate as much of it as possible, you’re setting yourself up for success. Grab a pencil and paper and list out all of your debt — then decide how you want to tackle it. You can either pay down your debts in order of total balance, or you can focus on your debt with the highest interest rate first.
 
“Small wins” can motivate you to continue paying down debt.

Typically, focusing on paying down the highest-interest-rate loans first is your best financial move here. However, I also believe “small wins” can motivate you to continue paying down debt. So, if you need to knock out a few of your smaller debts first to feel like you have some momentum, do that! Your debt payoff plan needs to be unique to you.

Once you decide what order you want to pay down your debt, set automated payments up to stay on track! When you take yourself out of the equation each month with automated payments, you’re less likely to skip “extra” payments in favor of something more exciting than knocking out your student loans or credit card debt.
 
3. Spending
Over-spending is a challenge that everyone faces at some point. The end of the year is often one of those times when you abandon your budget for seasonal spending — and the new year is a great time to right the ship.

What goes wrong
Budgeting is one of the most frustrating financial “to-do’s” that people try to tackle, and I honestly think it’s because society at large overcomplicates the process. Every available budgeting app has you track each line item to the penny.

How you can make it happen
Let’s simplify things. Whether you’re getting ready to purchase a home, or you’re wanting to curb your spending in other areas, try to narrow your budget down to a few broad categories:

Charitable giving

Saving

Debt repayment

Necessary expenses (housing, etc.)

Everything else

From there, set your priorities. Don’t overthink tracking every last penny. Work in broad percentages, automate savings, bill payments and any extra debt payments you want to prioritize, then allocate the rest of your spending according to what matters most to you!

Need help?

Talking through your financial goals with your family, friends, or a financial planner can help you to vocalize what you want — and motivate you to continue working toward your best financial life.

Source: pbs.org

Date Posted: Tuesday, January 15th, 2019 , Total Page Views: 779

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