7 Ways to Crush Your Financial Goals This Year
Even if last year's resolutions didn't quite pan out, don't let that stop you from sticking to good habits this year.
February 1, 2021
We are officially one month lighter in terms of 2021, but the good news is that there's still time to reexamine those initial New Year’s resolutions—even if they’ve already fallen by the wayside.
Whether you had planned to kick a bad habit, establish healthy eating habits or focus on financial wellness, now is as good a time as ever to refocus your efforts on bettering yourself this year.
With that said, if you’d like to reclaim your financial goals for this year—or simply establish new ones—you’ve come to the right place. Keep reading for a breakdown of the top financial resolutions you can make this year.
What are the top financial goals that people have this year?
Some of the most common financial goals that people set each year include:
Improving your credit score
Building an emergency fund
Live within your means
Maintaining a budget
Reducing your expenses
Saving for retirement
Here’s how you can make each objective come to fruition beyond just January.
1. Pay down debt
If you have credit card debt, student loans, or other debt, you’re not alone. Around half of Americans carry a credit card balance, and 14% have student loans, both of which can make it hard to save money. And if you took on additional holiday debt last year, it can make saving your money that much more difficult.
Reducing your debt is one of the best ways to improve your personal finances. Beyond that, it’s a vital part of not just your financial health but your overall well-being. Whether you recently took on holiday debt or are carrying debt from credit cards, personal loans, student loans, or a car loan from the past year or beyond, the monthly payments can be a significant expense. When these payments are minimized or eliminated entirely, you’ll have more financial freedom to save, invest, and focus on your other financial goals.
Aside from paying back the principal, high-interest rates can result in paying upwards of twice the amount you initially borrowed. For this reason, it’s in your best interest—pun intended—to pay off debt as quickly as possible and avoid taking on any new loans this year. Not only will you boost your credit score, but you’ll be better equipped to meet your other financial goals.
If you’re wondering how to pay off debt while minimizing interest, Tally can help. Our simple credit card management app allows you to pay down multiple cards with one monthly payment, guiding you on the path to becoming debt-free.
2. Improve your credit score
Though credit scores range from 300 to 850, the average is closer to 700. If yours is in the fair (600 to 660), poor (580 to 669), or very poor (300 to 579) range, giving it some TLC this year is a good idea. However, if your credit score is in the good range (670 to 739), you might aim to bump it up to the very good (740 to 779) or excellent (800 and above) range.
Why does this matter? Having a good, very good, or excellent credit score essentially shows lenders you’re a responsible borrower. Those with better credit can generally get approved on more loans, and they typically get better interest rates. With a fair or poor score, you may be able to still get some loans, though you’ll likely pay a higher interest rate, which can really cost you in the long run.
You can improve your credit score by:
Reducing your credit utilization ratio (under 30% is ideal)
Making all payments on time
Having your lender increase your credit limit (without running a hard inquiry)
Disputing errors on your credit report
Limiting credit applications and new accounts
While credit isn’t everything, a higher score can provide you with more financial freedom. And even more specifically, a good credit score can help you get approved for various types of lending with lower interest rates.
3. Start or build up an emergency fund
An emergency fund is often viewed as a cornerstone of long-term financial wellness. When things don’t go as planned, it provides a cushion to cover living expenses, helping you stay on track with your other goals. Additionally, it allows you to stop living paycheck to paycheck.
Your emergency savings should have enough money to cover at least three months of expenses, though six or 12 months is ideal. Of course, saving this much takes time. Whether you’ve yet to start an emergency fund or don’t have as much saved up as you’d like, this is a good time to make a concrete savings plan for the year.
Simply vowing to save more and spend less throughout this coming year is probably too vague. Figure out how much you need and calculate how much you’ll have to save each month (or pay period) to get there.
By doing some simple math, you can start planning your emergency fund. Let’s say you have $3,000 a month in essential living expenses. In that case, your emergency fund should have at least $9,000. If you save $250 a month, it would take you three years (36 months) to reach your goal. If you save $500 a month, you’re looking at a year and a half (18 months), and if you want to save $9,000 by the end of the year, you’ll need to set aside $750 a month.
Though this might seem like a near-impossible feat, it can be done with careful money management. And generally speaking, you won’t regret saving money, whereas if you push it off, there’s a chance you’ll wish you’d saved more later in life.
One of the most effective ways to save money is to schedule automatic transfers. That way, you don’t have to actively remember to save every time you get paid. And when the money goes into your savings account right away, you might not even miss it.
There are a few ways to set up automatic savings transfers. If your employer offers direct deposit, you can probably arrange for a certain amount to go into a savings account each pay period. If you don’t have the option of direct deposit, are self-employed, or want to be able to adjust it at any time, you can schedule transfers through your bank account. It’s easy to do yourself on your banking app or online account portal.
4. Live within your means
Living within your means—meaning you spend as much or less than you take in each month—is a vital piece of your financial well-being. For this reason, another critical factor in saving money is knowing when you’re overspending.
Do you use credit cards for purchases and then not pay the balance in full each month? Do you only pay the minimum amount due on your credit lines or loans? Are you often surprised to see a very low or overdrawn checking account balance? Do you resist checking your accounts to see how much you’ve spent on your credit or debit card? Do you feel as if you’ve saved money when purchasing non-essential discounted items?
If the answer is yes to any of these questions, it’s safe to assume you’re overspending. Recognizing it is the first step. Beyond that, careful budgeting and lowering your living expenses can help you reel things in.
5. Maintain a budget
Simply vowing to save more money this year might not be enough to actually make it happen. If you want to put away $200 a month, where will that money come from? You’ll need to fit it into your monthly budget just like any other recurring expense.
Creating a budget is a key component of smart money management, and it’s often critical to financial success. Getting started and sticking with your efforts can be tough. And yet, it can be really hard to meet your financial goals without a budget.
Meeting your savings goals takes diligence. If your paycheck is all but gone by the next time you get paid, creating and maintaining a budget might really come in handy. Budgeting apps and online tools make it easy to track your spending, set financial goals, and see where you might need to cut down. If apps aren’t your thing, a budget spreadsheet works just fine.
Having a clear picture of where your money goes every month can be eye-opening. For many, it’s enough to reel in spending and create better financial habits. Setting up and following a monthly budget isn’t always easy, but the process can be very rewarding, and it can help you meet your short and long-term money goals. Minimizing your debt with Tally can help, too, since reducing your balances is a great way to boost your budget.
6. Reduce your expenses
After creating a budget, you should have a good idea of where all your money goes every month. Expenses like housing, food, utilities, energy costs, and transportation are essential, but that doesn’t mean you can’t lower the cost.
For instance, if you frequently eat out, buy lattes, or order takeout, you can save a substantial amount of money by being intentional about grocery shopping and preparing more food at home.
Similarly, auto loan payments, car insurance, and gas can really add up. While owning a car is necessary for some people, others might be able to save a few hundred dollars a month by switching to public transportation and the occasional Uber ride.
If you’re like most people, you probably have a number of recurring charges that process monthly. While some might be necessary, you may find that others are superfluous.
There’s nothing wrong with having a TV streaming subscription—especially now, as we all spend more time at home. That said, you might not need four streaming services. Cutting down to just one or two could provide you with extra money to save.
Other recurring charges might include a gym membership, online fitness classes, mobile apps, magazines, newspapers, or subscription boxes. Smaller monthly expenses might seem insignificant, but they can really add up. Canceling a few charges could mean you have $100 or $200 of extra cash each month to put in your savings account.
7. Open or boost your retirement account
Another solid financial goal is to plan ahead for retirement. This could mean starting a retirement savings account, contributing $500 a month, saving the maximum employer-matched amount, or meeting the yearly retirement contribution limit.
If you don’t have a 401(k) plan through your employer, you can open a traditional IRA or Roth IRA on your own. (Anyone can open an IRA account, even if they already have a 401(k).) Saving as much as possible is a smart idea, whether it’s a percentage of your earnings or a flat monthly amount.
Do you already have a retirement account and want to boost your savings over the next 12 months? You might consider increasing your contributions by 1% or 2%. Another option is to set up recurring contributions for a higher amount than the previous year.
If you got a late start to saving for retirement, you might want to bump it up to 10% or 15% of your earnings. Online retirement savings calculators can tell you how much you’ll need by the time you retire and how much you need to save each year.
How to set smart financial goals to boost your financial health this year
You don’t have to choose just one financial goal this year. In fact, these financial objectives build off one another, helping you achieve overall financial wellness.
Having said that, there are no one-size-fits-all money resolutions. Your financial objectives should reflect your unique financial situation. There’s nothing wrong with reaching for the stars, and yet if you fall short, it might discourage you from continuing or trying again in the future. That’s why we recommend setting attainable and smart financial goals when considering the best ways to save money. If you meet your goal quicker than initially planned, you can always adjust it.
How Tally can help you keep stick to your financial goals
If paying off credit card debt is one of your financial goals, you’ve come to the right place. Instead of juggling multiple cards with various interest rates and balances, Tally allows you to manage your debt and pay off all your accounts in one place.
Besides providing you with a complete snapshot of your credit accounts, the app recommends a payment amount based on what will save you the most money that month. Plus, you’ll only have to pay one monthly payment.
Download Tally today to start taking charge of your personal finances.