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By Claire Hegstrom
The new year often brings the tradition of formalizing goals for the months to come. In a recent study, 44% of adults surveyed said their top new year’s resolution was to save more money. This stat comes as no surprise, as financial goals are so often tangentially tied to so many other aspirations on our list.
For instance, if boosting your mental health is a priority this coming year, saving money could help! A study by the American Psychological Association referenced that, “72% of Americans said they felt stressed about money, and 22% said they felt ‘extreme’ stress over their finances.” In correlation, a survey by PWC found that people who have built up their emergency fund are less stressed about finances.
Let’s dive into some financial new year’s resolutions that are easy to achieve and stick to for the long haul!
If you’re part of the 44% of Americans who are prioritizing saving this year, there are a few key things you should know before you start. First, keep your goal attainable! CNBC recently reported that 59% of Americans would not be able to cover a $1,000 emergency, so saving even a grand in an emergency fund puts you ahead of the game!
The best way to keep your savings resolution is to automate it. Start by picking a budget that prioritizes saving first. The zero-balance budget is a method of managing money where every single penny of your paycheck is accounted for. This type of budgeting lets you consistently automate your savings on payday.
The 50/30/20 budget may also work well for you! In this financial plan, 20% of your after-tax income is automatically allocated to a high-rate savings account and/or debt repayment.
If the start of the new year also means performance reviews at your workplace, this goal is an easy one to tackle! Retirement savings is one of the most important long-term financial goals you can work toward.
After your performance review—and hopefully merit increase—commit to giving your retirement contributions a boost. Experts recommend that you increase your 401(k) contributions by at least 1% every year. If you receive a 3% raise, try increasing your retirement contributions by just 1%. You’ll still be getting a 2% raise every paycheck, and you’ll be setting yourself up for success to live a comfortable life when you retire.
Have you ever taken a deep dive into your credit report to see if everything is correct? If you answered no, this is your year to familiarize yourself and get a deeper understanding of what impacts your credit score.
Many banks and credit unions will give you a free quarterly credit score so you can check your progress. Regularly reviewing your score and comparing it to financial decisions you’ve made during the quarter can help you learn what kinds of habits impact your credit score the most.
It’s important to know more than just your credit score. Monitoring your credit report once a year will bring you peace of mind and help you spot any potential fraud issues before they spiral out of hand. Remember, you can access one free credit report—which includes your FICO (Fair Isaac Corporation) score—every year at freecreditscore.com.
Saving more than you already are can sometimes feel like a stretch. Assessing your monthly spending habits can uncover extra saving opportunities you may not even realize you had!
Start by setting aside a weekend this month to negotiate your cable and utility bills. You may be surprised to learn there are perks for going paperless or for paying bills like your car insurance all in one sitting.
Another savings hack is to switch to generic brands when grocery shopping. Often, you can get the same exact foods, medicines, and household goods in a generic brand for 30% cheaper than the name-brand option. For an added shopping bonus, try using the small shopping carts when buying groceries. Studies show people spend 40% more when using larger carts at the store, and not because they needed those extra items!
Do any of your financial resolutions involve paying down debt faster? Commit to putting “extra” money that comes your way to paying down student loans, credit card debt or your mortgage. Prioritize paying off the debt with the highest interest rates first.
Use tax refunds, garage sale loots, and 3-paycheck months to get ahead on payments and decrease the amount of interest you’re paying on your loans. If you’re new to saving, be sure to allocate this extra cash to an emergency fund first, before paying off debt.
Looking for more ideas to help ring in the new year? Read these other blog posts:
Claire Hegstrom is an advocate of the credit union movement through and through. Passionate about financial education, she approaches money conversations from a candid and inclusive space focused on growth and awareness. As our credit union founding father, Ed Filene, once said, “Progress is the constant replacing of the best there is with something still better.” Claire hopes reading Money Mentor will help transform your life from the best to even better.
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