10 Financial Goals for the New Year
It's almost the New Year, and that means it's time to set some serious financial goals. Whether you want to save up to buy your first home, jump start your retirement savings, or pay off debt, there's no better time to set some financial goals than at the start of a new year.
These 10 goals will help you make lasting changes and take control of your finances in the New Year, and beyond. Choose to do just a few of them or you are ready to tackle all of them, but either way, working toward your financial goals — and having a plan to make your resolutions stick — are the first steps to a healthier financial future.
Stick to a Monthly Spending Plan
This may seem like a simple goal, but writing out a spending plan each month is the first step in getting control of your finances. If you can write out your budget each month, and put every dollar you earn in a specific place, you will begin to improve your finances.
Here's why: Writing out your budget and how you spend your money helps you get a better handle on where you are each month — where you're excelling, plus where you can improve, i.e. cut spending.
Write Down Every Penny You Spend
This is a great habit to keep not just the first few months of 2020, but the entire year. But it's not easy. In the first month, you may want to physically write down each purchase you make in a notebook that you carry with you. Sometimes physically writing it out makes you more aware of what you're spending.
As time goes on, you may consider moving to a smartphone app to track your spending. Many budgeting apps allow you to enter each transaction as you make it. You can record it in both the account and the category so you can stick to your budget and recognize your budgeting weaknesses.
Stick to Your Budget Each Month
This is a tough goal, but as you carefully set up your budget and track it, you should be able to stick to your budget.
Putting it simply, you should be spending less than you earn and putting money into savings. If you can stick to your budget, you will be more likely to reach your financial goals.
Pay Off Debt
Make a specific goal on how much debt you want to get rid of this year. If possible, you should try to get completely out of debt, but depending on your income and the amount of debt you currently have, you may not be able to do that.
Set a goal of how much debt you want to pay off this year, then work backward and calculate how much money you'll need to put toward that debt each month. If you follow a debt payment plan, you will speed up how quickly you can pay off your debt.
Don't Add More Debt
This goal is key if you are serious about getting out of debt. The one exception you may make to this goal is if you are ready to buy a new home. This means you need to stop using your credit cards. You should try to get by with your current car or save up cash for a new car.
If you can commit to yourself that you will no longer borrow money, then you can plan ahead for major purchases, and really make a dent in the amount of debt you have.
Save Up an Emergency Fund
The size of your emergency fund really depends on your current situation. If you are still getting out of debt, you should have a smaller emergency fund until you pay off your debt, like $1,000.
If your job is more volatile or you are the primary breadwinner for your family, you should aim to save up at least three to six months of living expenses in your emergency fund. This will help cover you in the event of an emergency without accumulating more debt.
Start Saving for Retirement
If you have a full time job, you should contribute up to the amount that the company will match until you are out of debt. Once you are out of debt, then you should begin contributing 15 percent of your income. The amount you get from your employer’s match should count towards that fifteen percent.
Otherwise, you should contribute 5 percent of your earnings until you are out of debt (not counting your mortgage). This allows you to start building your retirement savings, while still freeing up money to put towards debt. If you do not qualify for a 401(k), you should be consider contributing to a Roth IRA or a traditional IRA instead.
Better Your Career
This year you need to do something to advance your career. If you love your job, and you see yourself staying there for the next 10 years, you can still find something you can do to improve your career stability and to prepare yourself for the next step, such as continuing your education or applying for a promotion.
If you are not happy in your job, then perhaps it's time to look around for a more fulfilling or better-paying job.
Set up a Financial Plan
A long-term financial plan will address all aspects of your finances. This plan should outline a timetable of when you will purchase a house, when you will retire and any career changes you plan to make. It should also include an investing strategy and a plan to build wealth.
This plan will help you make financial decisions over the next few years and can be one of the most beneficial things you do. A financial plan can be more effective than just setting random financial goals without looking at the bigger picture. Your plan may be different if you are single than if you are married, but it is essential to have one, no matter your relationship status.
No matter your financial situation, it's always wise to cut spending where you can. After all, that's more money in your pocket that you can contribute to your long-term financial goals.
You may want to choose one category each month through the year to look for ways to save money. You may find that you need to keep working on the same category so that you can continue to find ways to save money each month. If you can slash your spending a bit more each month, you will have more money to put towards your other financial and savings goals.
Updated by Rachel Morgan Cautero.