The start of a new year is the perfect time to set goals, create a plan, and start working towards them. And while it’s easy to get swept away by needs and wants, it’s not realistic goal setting.
People often make the mistake of setting goals that are too large to hit maintain in just one year, such as losing a large amount of weight, going to the gym every single day, or buying a house.
In reality, these goals take a lot longer than 12 months to accomplish. That’s why it’s important to set goals that can be reached at a steady pace, instead of the drastic alternative.
So, as you take on the year ahead, we’re here to guide you through attainable financial goals that will help you for years to come.
Create and Maintain a Budget
If you’re not using a budget, it’s time to start one. Budgets are an important tool for everyone’s financial well-being. Not only do they help you track your income and expenses, but they can help you reach financial goals without feeling overwhelmed.
One of the most-used budget tools is the 50/30/20 rule. This rule separates your finances into three major categories: 50% for needs, 30% for wants, and 20% for savings and debt-payoff. With this structure, every dollar of your income is allocated to a specific category that will help you appropriately plan for housing costs, student loans, car payments, groceries, and so much more.
To make it simpler, there are even apps you can use to track your income and expenditures. Apps like Mint or Spendee help you manage bills, income, savings, and goals. They even list out your subscriptions and other recurring fees that you may not need. You can simply manage your goals, investments, and budget at your fingertips. To learn about our five favorite budgeting apps, click here.
Enhance Retirement Savings
Investing in your future is one of the best gifts you can give yourself. Investing allows you to make your money work for you through accounts like 401(k) plans or IRAs.
Many companies offer a 401(k) match program, so if you’re not utilizing that already, you should be. Matching programs are designed to encourage employees to participate in the company’s 401(k) plan, so when you do, you’re rewarded. These programs provide money that is matched at the rate you contribute. For example, if you contribute 3% of your annual salary into your retirement plan, then your employer will deposit an additional 3%, totaling to 6% savings for the year.
If you are self-employed or are looking for additional ways to save, consider opening an IRA. These tax-deferred accounts come in different varieties, such as a Traditional IRA or a Roth IRA. While the plans are similar, there are some key differences.
- Traditional IRAs allow you to make pre-tax contributions that are fully or partially deductible on a tax return.
- Roth IRAs are taxed up-front, so your contributions grow tax-free until you’re ready to withdraw the funds in retirement.
- Maximum contributions for both Traditional and Roth IRAs is $6,000 annually. If you’re older than 50, the IRS will let you utilize a catch-up contribution, allowing you to contribute up to $7,000 annually.
To learn more about the differences between the two accounts, read our blog.
Either way, saving for retirement is an essential component to financial freedom, and with the right budget, everyone can afford to put money aside for the future. To calculate what you need to retire, visit the Slavic401k retirement planner calculator.
Start an Emergency Fund
While setting goals for the year ahead can be fun, it’s also important to plan for the unexpected.
This year, consider starting an emergency fund to help pay for things like medical bills, vehicle maintenance, the loss of a job, or other unplanned circumstances. Putting money aside each month will help you conquer anything that comes up without adding additional financial stress in the future.
If you’re using a budget, simply add another category and allocate funds from each paycheck. As the fund grows, your stress will reduce. Learn how to use an emergency fund here.
Create a Debt Payoff Strategy
Paying off debt can be stressful, but with the right strategy, it doesn’t have to be. Getting out of debt is a great way to take control of your finances and work towards true financial freedom.
The first step is to analyze the debt you have. This may come in the form of student loans, a vehicle loan, credit cards, and more. Once you identify the debt you have, review the interest rate for each and start paying down the highest one first. If you need additional funds to help you pay down debt, review the tips below.
- Use a budget app to track your debt and manage bills
- Reduce unnecessary spending
- Reduce subscriptions and other recurring payments
Next, set up a plan to repay your debt so you know how much you need to put aside each month to meet monthly payments. By strategizing, the debt you have won’t seem unmanageable and financial freedom will start to feel attainable. Strategy is key, and all it takes is a little planning.
Remember, there are many attainable goals you can set for the year ahead, but the key is to keep them realistic and manageable. If you’re looking for additional financial goal ideas, visit the Slavic401k blog.