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By Claire Hegstrom
Every new year, we promise to visit the doctor regularly, to start flossing daily, to cook more meals at home, etc. As we look at the year ahead, we write goals to make us better people, friends, and family members. Just as we hold other aspects of our life accountable with goals, we should also be creating personal finance goals. Writing money goals can help keep us focused, decrease stress, and ensure that we can do the things that make us happy, while building healthy habits that keep our finances on track.
Creating financial goals doesn’t mean cutting fun out of your budget, or counting every penny, but it does give you a holistic view of your financial health, and can help you focus on small changes you can make to feel more confident about your finances. Let’s take a look at some super simple steps to foster a financially fit new year.
I know what you’re thinking, “Won’t that hurt my credit score?” Nope! Your credit score is not negatively impacted when you check it yourself. If you’re someone who thrives off instant gratification, check your score monthly to see how little changes in your spending and debt payoff can increase your credit score. While drastic improvement in your credit score can take months or even years, you could see small increases in your score in just a few weeks.
Remember, you can access one free credit report—which includes your FICO (Fair Isaac Corporation) score—every year at freecreditscore.com. It’s important to check more than just your score. View all your open accounts on your credit report and verify that you opened the account. Fixing any discrepancies in your credit report can save you from future fraud and alert you to any security issues.
If you’re looking to jumpstart your savings goals with a boost, cutting three expenses for one month can help. Sit down and think of three things you can live without for just 30 days. Having an end date for your goal will make it feel more manageable, and it’ll be easier to stick to! By the end, you may even realize that you could cut some expenses for six months, or possibly forever! Write down exactly what you’re planning to forgo in a journal, and place a tally mark next to the item every day you go without. Here are a few alternate options to help you save big.
Don’t forget the most important and rewarding step: deposit the money you’d normally spend on these expenses into a high-rate savings account.
Creating the budget for the new year is a great way to get a holistic view of where you’re spending money and can shed light on opportunities to start saving smarter. Perhaps the most important part of building a budget is choosing a sustainable model you can actually stick with.
If you know you’re someone who isn’t interested in the nitty gritty details, check out the 50/30/20 Budget where you’ll set up automatic transfers of 20% straight into savings every payday.
Another option for those who love numbers is the Zero-Sum Budget. In this model of tracking, you’ll allocate where every single penny of your paycheck is going. Have no fear, it’s incredibly easy to set up and is virtually no work once that’s done.
No matter what you choose, automating your savings with regular transfers is the key to sticking to any budget, because if you don’t have to physically move the money yourself, you won’t have to see that it’s gone.
You’ve been working hard all year, and when it comes time to receive your yearly raise, we hope you celebrate all you’ve accomplished. After treating yourself to a delicious dinner, don’t forget to increase your retirement contributions! Experts recommend that you increase your 401(k) contributions by at least 1% every year. Let’s say you get a 3% raise, if you increase your retirement contributions by 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 down the road.
One of the quickest ways to put more money back in your pocket every month is by refinancing high-interest debt. Often, refinancing credit cards at the beginning of the year is advantageous, as many credit card carriers offer 0% balance transfer promos, or 0% interest for 12 months. Slashing interest can make payments more manageable and can help you trim down debt quicker.
Another option is to refinance your auto loan for a better rate. If you’ve been working hard to boost your credit score during the previous year, it could be a good time to see if you can lower your monthly payments on your auto loan and save a few thousand dollars in interest! Don’t forget to put any money you’re saving on lowered payments into a savings account so that you can reach your other financial goals even faster!
If tackling all these goals at once seems overwhelming, check off one goal per month as you head into your new year with a new mindset! By December, you’ll feel relaxed and prepared as seasonal spending increases, because you’ve been saving all year! Good luck, we can’t wait to see you thrive.
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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