Let’s talk financial resolutions.
“New Year, new me.” That’s the motto that drives millions of Americans’ New Year’s resolutions each January. With a lot of hard work and dedication, the calendar year is just as good a time as any to set out on a new journey.
Aside from a few traditionally popular goals relating to health and hobbies, financial goals are among the biggest resolutions come January 1st. In many ways, setting out after a new financial goal is a lot easier than setting out on certain others. You don’t need to wake up at 5am to hit the gym or try to stay awake as you try to hit your nightly page goals to finish a book a month.
Not that sticking to your finance resolutions is easy. It takes just as much of that old-fashioned New Year mettle, and it can be just as easy to slip up.
Here’s the big issue: Not every financial goal works on its own.
One big issue well-meaning goal-setters consistently run into is not developing a financial plan that sets them up for success, because everything in your financial life—from your debt to your credit score to your tax return—is related. While “going out to eat less” is a noble resolution, it may not help you reach your financial dreams unless you’ve built a financial plan for getting there.
We’re here to help! Whatever your financial dreams may be in the long run, we’re going to list a few of the best paths to making them reality. Build your financial resolutions into a bigger plan that involves these three things, and you’ll be that much closer to reaching your financial goals in 2019!
This should be priority number one in your financial plan. Finding ways to reduce your debt is one of the single best moves you can make for your financial future.
It’s not easy, though. That’s why most age groups in the U.S. have an average of over $34,000 in debt! It’s easy to get into debt, but it’s a lot harder to get out—especially when money is tight. Whether that may be your student loans, a car loan, a mortgage, or credit cards, make sure to build your 2019 resolution into a larger financial plan that prioritizes paying down debt.
For example, if your resolution for this year is to spend less money on dinners out and cook dinner more, awesome! Make a clear goal for how much money you expect to save doing this—and consider using that extra cash to pay down a credit card. Not only will you be saving yourself from future interest payments, but you’ll be helping raise your credit score. Which brings us to…
Improving your credit score is one of the biggest financial favors you can do your future self, which is why it should absolutely have a place in your financial plan.
Your credit score takes into account several factors, from how frequently you pay bills on time to what percentage of your credit card limits you use at a given time. A higher credit score will give you access to lower interest rates, so if you’re eyeing a car loan or mortgage in the next few years, you can save thousands of dollars by moving your score up slowly but surely until then.
If your resolution is to spend less money on dinners out, that could—on its own—help lower your revolving credit usage. Or, maybe you can move the needle by simply choosing automatic payments!
No plan is complete without financial literacy to guide your financial decisions, so we recommend adding a crash course (or two) to your financial plan.
Knowing the ins and outs of various financial tools and programs can have a huge impact in the long term. For example, do you know the differences between a 30-year mortgage, a 15-year mortgage, and a 5-1 ARM? Do you know what the term “liquidity” means? You absolutely may know these answers—and we hope so!—but chances are that there are some things you could stand to learn that will help you along the path to your financial dreams.
Your dinners out may not feel directly related here, but just trust us on this one.
Whatever your financial goals may be in 2019, you need a financial plan for getting there. Otherwise, you’re shortchanging your financial resolutions and rendering them less effective than they could be.
However, when you add the basics to a financial plan—lowering your debt, raising your credit score, and becoming more financially literate—you can supercharge your 2019 resolutions. Remember, you may have a whole year ahead of you, but if you plan right, your financial future will be bright well beyond the New Year.