When you hear “New Year’s resolution,” you may be quick to assume we’re talking about the common “new year, new you” goals that involve joining a gym or eating healthier. But, we want to shift your perspective a bit and get you thinking about financial New Year’s resolutions.
Trends show that there’s really no better (or more popular) time to set new goals than the beginning of a new year. People are motivated and energized by the thought of hitting the “reset” button with a New Year’s resolution that will help set the trajectory for the year.
However, one study by U.S. News found that nearly 80% of resolutions fail by February. Why is this? More often than not it comes down to lack of self-discipline and setting goals that are too lofty. We’ve outlined a few short-term, or “smaller goals” to help set you up for success for the new year.
Quick wins for short-term financial goals
If you’re looking to become savvier with your spending, budgeting, and overall financial planning, we suggest starting with short-term goals. This approach not only gets you into the habit of exercising self-discipline, but it also gives you a chance to celebrate the small victories along the way.
Set up a monthly budget
Setting a budget is single-handedly the most practical step you can take to gain more control of your personal finances in our opinion. Taking the time to outline how much money you make each month and exactly how it’s being spent can help you make better financial decisions in the day-to-day.
Budgeting your money isn’t about being perfect, it’s about becoming more aware. Like anything else, it takes practice and a disciplined mindset to get into a consistent rhythm. Don’t be afraid of failing or messing up. Approach your budget objectively and with a willingness to get better.
Start an emergency fund
If you’ve taken any personal finance classes or courses, you’ve likely heard about the importance of having an emergency or “rainy day” fund. We like to think of emergency funds as a financial life preserver; it’s the sense of security you want when the unexpected happens (and it will).
A big question we often hear is, “How much do I need in an emergency savings fund?” There is no one-size-fits-all approach and the amount depends on your financial situation and lifestyle. Having 3-5 months of your monthly income saved is a good goal to aim for, but if it’s more helpful, you may want to take it in bite sizes and set a smaller, more attainable goal to pursue.
Pay off one or more small debts
The discussion around debt can be a stressful topic, but it’s never one that should be avoided. If you feel like you’re swimming in debt, whether it be from a credit card or other high-interest loans, you’re certainly not alone.
Since we’re talking about short-term goals, we recommend taking a look at your monthly expenses and identifying a smaller recurring payment (or two) that you can pay off entirely. Removing smaller debts each month is an effective way to chip away at your overall debt.
And most importantly: Make sure you celebrate every small win along the way.
Stop using credit cards
Credit cards are still up for debate, but if one thing is for sure, it’s that they’re not for everyone. For those who spend excessively or have a tendency to spend more than they have each month, choosing not to use credit cards may be the best decision for your financial future moving forward.
We’re not saying credit cards are a bad thing—but they can lead to lingering, unwanted debt. If you’re not ready to cancel your credit cards, you may consider keeping cash on hand instead. Making money less accessible can be a wise alternative and healthy first step toward saving.
Meet with a BE Wealth financial advisor
Looking to invest or give more structure to your financial planning? At BE Wealth, one of our advisors will be happy to sit down with you, walk you through your goals for both now and in the future, and help craft a plan and strategy to get you on track for pursuing those goals.
When it comes to setting your financial goals for the new year, remember to start small and learn to celebrate the victories, both big and small, as they come!
This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.