The Ultimate Guide to Your New Year's Financial Resolutions
The Ultimate Guide to Your New Years Financial Resolutions
When it comes to new year’s resolutions, we always hear the same old resolutions about losing weight, travelling, eating healthier, and getting organized. Break the mold this year and make 2018 about financial and personal growth with some clear and actionable goals.
The problem with most new year’s resolutions is that they are too general and vague. Without a hard number to aim for and a set deadline to complete it by, you are setting yourself up for failure from the beginning.
Our brains aren’t wired to be able to just say, “I want to save money this year” and be able to do it. Too many opportunities for immediate gratification get in the way, and without an exact amount to save up and an exact date to save it by, it will be extremely difficult to hold yourself accountable and pass up the purchase in favor of saving the money for a later date.
When creating your new year’s resolutions – financial or not – you should make sure that your goal is SMART. This technique helps you create a resolution that is specific, measurable, actionable, relevant, and time-bound.
Having a SMART goal will increase your chances of success with your resolution by making it easier for you to stay motivated with a clear number and deadline in mind.
We have created ten resolutions following the SMART method that you can use as your New Year’s resolution, or as inspiration for your resolution:
1. Build an emergency fund of one month’s pay by the end of the year.
Life has a funny way of being absolutely unpredictable. In order to be prepared for an unexpected layoff, trip to the emergency room, or auto repair, you should have at least one month’s pay set aside in a savings account. If you don’t have one set up already, make it your new year’s resolution to build that savings account by the end of the year.
To make it more manageable, divide a month’s pay by 12 and set up your budget so that you can save that amount per month.
2. Pay every single bill on time during the year to avoid any late fees.
If you have a habit of paying your bills late and racking up late fees, make your new year’s resolution to pay your bills on time.
If you haven’t already, set up automatic bill pay so that you don’t have to think about it and your bills will be paid on time. If you are a member with us, call (504) 885-6871 and speak with a teller to set up your automatic bill pay.
If you do not want to have automatic bill pay, put your bill due dates in your phone and schedule reminders to go off a week before they are due and the day that they are due.
3. Check your credit report every four months for any errors and fraudulent activity.
Each major credit bureau (TransUnion, Equifax, and Experian) allow you to request and download your full credit report once a year. This means that every four months, you can be checking one of your three credit reports for free.
Credit bureaus frequently make errors in consumers’ demographic information, and sometimes even make errors that result in being labelled as a higher risk than you are, causing you to have higher interest rates when taking out loans. If you don’t already, make it your resolution to check your credit report every four months to make sure that everything is correct.
4. Improve your credit score by 20 points by the end of the year.
If you have found that your credit score isn’t as high as you would like, make it your resolution to increase your score by a certain amount of points by the end of the year - twenty points is a good number to aim for, but it can be whatever you want.
If you are a member at POECU, you can also make an appointment to have a free financial counseling session and discuss improving your credit score with Kristy by calling (504) 885-6871.
5. Set up a budget that works for you by January 31st, and use it for the rest of the year.
Check out our blog post that covers five different budgeting methods and test them out to see which works best for you. By January 31st, pick whichever method works the best for you and use it religiously the entire year to keep on track with your finances
6. Every Sunday, write down your purchases and expenses for the week.
A lot of people struggle with spending mindlessly or overspending in certain areas of their life. If this sounds like you, make it a resolution to track all of your expenses.
Throughout the week, save all of your receipts in a certain location organized by date. Include your bills in this as well. Every Sunday (or whatever day you choose), sit down and list those expenses in a designated notebook. Make sure you write down the date on the receipt, where the money was spent, and how much money was spent.
Doing this throughout the year will help you notice patterns and see where you are overspending or mindlessly spending. This will also serve as a place for you to reference when looking over your bank statements to make sure there are no errors.
7. Open an IRA by January 31st and put $300/month towards it throughout the year.
It is never too early to start saving towards retirement. If you haven’t already, open an Individual Retirement Account and budget to put in a certain amount of money per month.
If you are a member with us, you can call (504) 885-6871 and speak with Kellie about opening an IRA with us.
8. Pay off a loan by the end of the year.
If you are in a lot of debt, resolve to completely pay off one of your loans by the end of the year. Whether you decide to pay off your smallest loan or the loan with the highest interest, pay one off and get yourself closer to financial freedom.
The best way to do this is to use the Debt Snowball method by Dave Ramsey. Whichever loan you decide to pay off completely, figure out how much money you will need to put towards it per month and base your budget around this figure.
9. Cut back your expenses $200 each month.
If you’re looking to cut back on your spending or expenses, don’t just say that you want to cut back. Instead, think of an exact dollar amount. Having this dollar amount in mind will make it easier to figure out what you need to cut out to reach this goal and will help you hold yourself accountable when you are tempted to overspend.
Once you decide on your dollar amount, read our blog post 7 Ways to Cut Back on Spending to get some inspiration on how you can achieve your goal each month.
10. Pay down 20% of your credit card debt by the end of the year.
The average American household has $15,624 in credit card debt alone. If you owe an overwhelming amount of credit card debt, make it your new year’s resolution to pay that down by a certain percentage by the end of the year.
Whether that figure is 100% or 20%, make 2018 the year that you begin to dig yourself out of the hole. If you need help figuring out a plan for how to pay your debt down and you are a POECU, call (504) 885-6871 to make a financial counseling appointment with Kristy.
Make 2018 the year of financial success
None of these resolutions are easy, but nothing worth doing is ever easy. Choose one of the resolutions above or make one of your own and get to work! Write down your resolution on a paper and hang it up somewhere that you will see it every day.
Get your friends and family involved and hold each other accountable throughout the year to make sure you are following your resolutions.
If you fall off the wagon at any point, that’s okay – it doesn’t mean your resolution was a failure. Just make sure to get back on as soon as possible. Keep track of your progress and setbacks throughout the year so that you can visualize your journey. If you don’t reach your goal at the end of the year, you will be able to look back and evaluate what went wrong and what can be changed in the future.
Just remember that “new year, new me” isn’t the truth. You are not a different person at 12:00 AM on January 1st that you were at 11:59 on December 31st. You still have the same strengths and weaknesses that you always have had. Keep that in mind as you are setting your resolutions, and remember that the most successful resolutions are ones that play to your strengths and help form new habits to replace your weaknesses. If you’re a spender who has never kept a savings account, you won’t magically become a saving guru overnight. You will need to figure out how to use your strengths to break your spending habit and reach your goal.
Happy resolution making! We wish you financial success and freedom in 2018.