Different generations might have different financial goals for the new year. Older generations are more focused on retirement, while younger generations lean toward saving for big purchases or increasing their investments. Determining your goals is a great starting point for improving your finances. Below are six financial resolutions that can be useful for all generations.
1. Give yourself a financial checkup
Paying down debt, contributing to your retirement plan, and making a budget that you can keep can help your financial health. Understand how much you’re taking in after taxes, how much you’re spending, and how much you’re saving. Track your spending using a spreadsheet or online budgeting tool for 30 days. Determine how much money you need to cover your fixed monthly expenses, such as your rent or mortgage and other living expenses, and how much you’d like to put away for savings.
2. Reset your retirement accounts
For retirement, the recommended rule of thumb is to save 10–15% of pre-tax income, including any match from an employer, starting in your 20s. If you can save for retirement through a 401(k), 403(b), or other plans sponsored by your employer, consider budgeting a set amount each month to deposit in your account. If applicable, consider contributing to an individual retirement account (IRA). If you are 50 or older by next Dec. 31, you can make additional catch-up contributions on top of the regular limits. At the same time, save amounts you can realistically afford—contributing more than that may result in incurring debts to cover everyday expenses.
3. Calculate your net worth
Calculating your net worth is key in assessing your financial health and reaching your goals. Prepare a list of your assets (what you own) and subtract your liabilities (what you owe). This will help you understand your total net worth. Looking closely at all your assets and liabilities will help create a clear picture of where you should prioritize current spending and savings and where you may need to change those habits.
4. Project the cost of essential big-ticket items
If you have a considerable expense on the horizon, such as college tuition, increase your savings and treat that money as being spent. For example, if you need the money within a few years, keep it in relatively liquid, safe investments like short-term certificates of deposit (CDs) or a savings account. If you have more than a few years, invest wisely based on your time horizon.
5. Update your savings goals
To help you reach your goals, transfer amounts earmarked for savings from your checking account to designated separate savings or investment account. Have a set amount from your paycheck auto deposited into savings.
6. Pay down debts
You should also reset how much you plan to pay on your loans, debts, and home mortgage accounts. Consider paying extra principal toward your monthly mortgage payment to earn a risk-free return on that money. If you owe money on your credit cards, determine how much you can realistically pay off during the year. For best results, avoid charging additional purchases on those cards. Consider paying off high-interest credit card debts or transferring your credit card balance to a new card with a lower interest rate or even a 0% promotional rate. Make sure to check your credit report regularly and take steps to repair any negative aspects.
Conclusion
The New Year can be an excellent opportunity to restate your financial resolutions and maintain a checklist to track how you are doing financially. Be cautious about setting too many or unrealistic financial goals. Otherwise, you may be unable to accomplish any of them.
Key Takeaways
- Give yourself a financial checkup
- Reset your retirement accounts
- Calculate your net worth
- Project the cost of essential big-ticket items
- Update your savings goals
- Pay down debts
