2020 is nearly over and that means that it’s time to think about making some financial New Year’s resolutions for 2023. If you haven’t thought about it yet, don’t worry! Addition Financial is here to help.
New Year’s resolutions don’t need to be complicated. In fact, they can be very simple. Here are some pointers to help you make the right financial New Year’s resolution this year.
Step #1: Identify Financial Stressors
Often, the things we choose to make New Year’s resolutions about are things we want to change. That’s why so many of us resolve to lose weight, exercise or pay down debt.
When you’re thinking about which financial resolutions to make this year, a good place to start is with the things that cause you stress. Some common financial stressors include:
- Credit card debt
- Out-of-control spending
- Lack of a financial safety net
- Lack of retirement planning
- Inability to qualify for a mortgage
We suggest writing down the things that stress you out financially and then rating them from most to least stressful. This exercise will help you identify your financial weak points and may help you to pin down your New Year’s resolutions.
Step #2: Identify a General Goal
Once you have a list of financial stressors, it’s a good idea to decide on a goal to go with the ones that are most important to you. For example, using the list above, your goals might be:
- Pay down credit card debt
- Create a monthly budget and stick to it
- Save money to create an emergency savings fund
- Open and contribute to a retirement account
- Improve your credit score
These goals are general for a reason. Your financial New Year’s resolutions need to be specific but defining your goals starts with generalities and ends with a specific plan.
Step #3: Fine-Tune Your Goals
Your general goals need to be honed until they are achievable. Let’s face it, poorly-defined goals usually turn into unmet goals. It’s your job to make sure you understand what’s possible, so you can work toward it.
If you’ve got a lot of credit card debt, for example, your fine-tuned goal might be to reduce your debt by 25% over the course of the next year. If you only have a small amount of debt, you might decide that your goal is to get out of debt completely.
If your goal is to create an emergency savings fund, you should start by creating a monthly budget and deciding how much you need. We recommend having six months’ worth of expenses saved.
Step #4: Break Down Your Goal into Steps
One of the biggest mistakes people make when setting New Year’s financial resolutions is that they aren’t realistic and practical about how to keep the resolutions they make. That’s why we suggest breaking down each goal into small and achievable steps.
For example, if your goal is to get out of debt, you might include the following steps in your resolution:
- Calculate your debt
- Choose a debt reduction strategy
- Create a monthly budget that allocates enough money to meet your goal
With any goal, it’s a good idea to start with the result you want and work backwards to figure out how to get there.
Step #5: Revise or Create a Monthly Budget
Do you already have a monthly budget in place? If you do, then the end of the year is the perfect time to tweak it. Here are some adjustments to make:
- Adjust your income if you’ve received a raise or changed jobs
- Adjust other fixed expenses – for example, update your rent payment and insurance premiums
- Average out your costs for variable expenses such as groceries and clothing and adjust your budget accordingly
Of course, you should also make room in your budget for your financial New Year’s resolutions. For example, you might cut 10% out of your entertainment budget and use that money to reduce your debt or save for your emergency fund.
Step #6: Create Monthly Accountability Check-Ins
The final step we suggest is to hold yourself accountable for meeting your New Year’s resolutions. A monthly check-in will give you the opportunity to evaluate your progress, revise your budget as needed and ensure that you’re making steady progress toward your goals.
Of course, you may decide that you need accountability checks more than once a month. If you’re the type of person who sometimes abandons New Year’s resolutions before Valentine’s Day, then do a weekly or bi-weekly check-in if that works best for you.
It may also be helpful to work with a buddy on accountability. Do you struggle with a spending? Pair up with a friend and encourage one another to minimize spending and pay down debt. Or, have a mini competition to see who can save more money in the coming year.
Defining your financial New Year’s resolutions can be easy and practical with the suggestions we’ve made here. We hope that you’ll be inspired to meet your financial goals in 2023!
Need help saving for the future? Click here to learn about Addition Financial’s savings accounts.
Posted on Dec 30, 2019
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