The new year is the perfect time to revisit your financial goals and make adjustments for the year ahead.
It’s important to be realistic with yourself to ensure you don’t overspend or under save. Start by reflecting on the previous year and ask yourself these questions:
- Did I have a budget?
- Did I stick to my budget?
- Did I spend too much in certain areas?
- Did I reach my savings goals?
- Did I pay down debt?
After answering the questions above, review your answers and determine where changes should be made. Now is the perfect time to choose new goals that will help you solidify a solid financial foundation or expand on your existing one. Read on for some tips to help direct your finances in the new year.
Create or Revise Your Budget
Budgeting is one of the best things you can do to be financially successful. When you have a budget, you know exactly how your income should be divided and where it is being spent. Some budget goals to consider for the new year include:
- Prioritizing needs instead of wants
- Reducing spending in non-essential categories (shopping, dining out, salons, etc.)
- Increasing savings for retirement, emergency fund, or savings accounts
If you don’t have an existing budget, it’s time to start one.
The 50/30/20 rule is a simple method for budgeting monthly income into three major categories: 50% for necessities, 30% for wants and desires, and 20% for savings and debt payoff. Using mobile apps like Mint or You Need a Budget can help you track income and expenses to ensure you are allocating funds to the appropriate categories.
Once your budget is created or revised, you can start working towards your goals. If it helps, include a friend, family member, or roommate in your budgeting process to help keep you accountable.
Repay Debt
Paying down your debt, such as a car loan, credit cards, and student loans is an important part of financial freedom. In the new year, evaluate your existing debt and determine a strategy for paying the funds back.
It’s typically a good idea to pay down debt with the highest interest rate first, which is most likely a credit card. Review your rates and add the debt to your budget so you can track how much you’re paying it down throughout the year.
Some tips to help you pay down debt quicker include:
- Getting a side gig for additional income that can be used to pay debts
- Reducing non-essential spending, like shopping, subscriptions, and dining out
- Prioritizing debt payoff in your monthly budget
- Selling unwanted or unused items and using the funds to pay debt
- Reducing the use of your credit cards to avoid overspending
- If paying a higher interest rate on your car loan or mortgage than the current rate market, research whether refinancing for a lower interest rate makes sense
These simple steps can make a big difference in your overall debt payoff plan. If you find yourself in a stressful financial situation regarding your debt, read the Slavic401k blog about reducing financial stress here.
Increase Savings
Saving looks different for everyone, which is why a monthly budget is a great idea. Not only will a budget help you categorize spending, but it will help amp up your savings.
Many experts suggest saving 20% of your income, which can include savings accounts, retirement accounts, and emergency funds. By setting aside money each month, you can ensure that you’re prepared for an emergency or unexpected expenses, such as medical bills, car repairs, or job loss.
In the new year, determine how much you’d like to save and contribute to your accounts. Some ways to increase savings include:
- Maxing out 401(k) contributions
- Utilizing employer-match 401(k) programs
- Getting a side gig for additional income, such as becoming an Uber driver, selling goods on Etsy, or freelancing
- Setting aside additional income each month for savings
- Reducing non-essential spending
You can also save money by planning for the upcoming tax season. This strategy helps you keep more money in your pocket and can be a great guide to use throughout the year. Some additional ways to save include:
- Using a Flexible Spending Account (FSA)
- Cutting losses to offset investment gains
- Making tax-deductible charitable contributions
- Deferring income to a retirement savings plan, such as end-of-year bonuses or raises
Having a strategy is a key component to financial success and can change the course of your year. By reviewing and editing your budget, and adjusting where needed, you can make a big difference in your debt payoff, savings goals, and spending habits.
It’s time to review your finances and make a solid commitment to change for the new year. If you need additional resources along the way, speak with a financial advisor or view the Slavic401k blog for more information.
