It’s a few weeks into the New Year. How many of you have kept your new year’s resolutions? Like many of us, we have the best intentions on January 1st but after a few weeks, we abandon some of our plans, resort back to our previous ways and the old status quo now becomes the norm again. Hopefully, you are all sticking to at least one of your resolutions.
But, how many of you take the time to make financial new year’s resolutions? These decisions could heavily impact your future well-being in the short term and potentially in the long term. It is so important to get in the right financial mindset. And, although January is a perfect time to start, in all actuality, it is never too late to begin. You might just have to push yourself a little harder to be more diligent and deliberate with your financial decisions. Here are some financial new year’s resolutions to get you started:
1. Create or revisit your budget
If you don’t have a financial plan, now is the perfect time to create one. Keep an eye on where you are spending your money. Record how much is spent on food, entertainment, gas, clothes, toiletries and all other expenditures. Once this is set, then create goals or parameters around each of the buckets you identified above. Once you start tracking, you may be quite surprised at how quickly money is spent in each of your designated categories.
2. Increase retirement plan contributions
Contribute between 10 to 15 percent of your paycheck to your company’s 401(k). It is an important retirement tool and should be taken advantage of if offered. Data studied by the Pew Charitable Trust reported that 35 percent of private sector workers don’t work for a company that offers a plan. The study also concluded that only 50 percent of millennials, whose companies offered plans, were actually making contributions while 80 percent of baby boomers and 75 percent of Gen-Xers are contributing.1 Think of it as paying yourself for your future. According to information from Vanguard, the average 401(k) contribution was 6.2 percent with the number increasing to 10.9 percent when employer contributions are included.2
3. Set your financial goals
Set practical financial goals for yourself. Whether it be saving a certain dollar amount for the future or paying down a debt, have goals and then reward yourself when they are met.
4. Reevaluate your plan during the year
Periodically, check in and review how your plan is performing. In most cases, you don’t want to change your investment and the strategies you originally set, but necessary tweaking here and there may be required to keep you on track.
Think of today as ‘Day One’ of creating your own new road map for your financial future. Resolutions of the financial kind are essential for beginning your path toward financial security.