6 Financial New Year's Resolutions to Get Your Finances Back on Track
Setting financial New Year's resolutions can help you change bad habits and improve your financial situation.
Contributing Writer at Tally
January 3, 2022
Going into the new year, you may make a point of setting financial goals for yourself. Perhaps you weren’t satisfied with your money management last year. Or, maybe you did well with your personal finances and want to keep that momentum.
Just what types of goals can you set for yourself going into the new year? Here are six financial New Year's resolutions that you can use to help realign your finances with your goals.
Why setting financial goals is important
If you’ve never set financial goals, you may be wondering why you need to. Setting goals is important because they allow you to see how your everyday decisions impact your financial health.
When you set a goal, you make a conscious decision to change something for the better. You’ll probably need to evaluate your mindset and habits regarding money.
When you set goals, you may discover the detrimental impact your previous habits had on your financial life. For instance, you may not have thought twice about buying coffee at your local cafe five times per week. But, if you set a goal to fund a savings account, you may quickly realize that your daily coffee was costing you $15 a week, adding up to more than $750 per year.
Setting goals can help you identify and focus on areas to improve. They can hold you accountable as you make positive changes.
6 financial New Year's resolutions
Financial New Year's resolutions can vary from person to person and have a lot to do with your situation. Below is a list of six resolutions that may help you get started.
Set a budget
Setting a budget is one idea to help you start the new year on the right foot. A budget allows you to see the money you have coming in versus the money you have going out. It can hold you accountable and is a great tool to use if you’re trying to save money. Learning how to create a budget properly can go a long way toward making sure you stick to it throughout the year.
Refinance your debt
When you refinance your debt, you effectively lower the interest rate. This can end up saving you money since you won't have to pay as much in interest (though you should be mindful if you extend your loan term, as this may decrease your monthly payment but increase the total amount that you end up paying in total. There are calculators available online to help you make these determinations).
Refinancing is possible for numerous types of debt, including:
Credit card debt
Lowering your monthly payment can not only save you money, but it could also increase the likelihood that you make on-time payments. This, in turn, could help boost your credit score.
A financial advisor can help you better evaluate how refinancing will impact your situation.
Automate your savings
There are ways for you to save money without thinking twice about it. One way is to automate your savings. When you automate your savings, money is automatically taken from your paycheck and deposited into a bank account or retirement account of your choosing.
For instance, let's say that your take-home pay is $1,000 per week, and you receive 52 paychecks a year. You have set a goal to build an emergency fund worth $2,500 by the end of the year. If you divide $2,500 by 52, you realize that you must put $48.08 in your bank account each week.
You can request to have this amount automatically withdrawn on payday so that it doesn’t even hit your checking account. That way, you’re not tempted to spend the money since you don't have immediate access to it.
Most financial institutions allow you to automate deposits. In addition to doing this with your savings account, you can also consider making automated contributions to an IRA or an employer-sponsored 401(k) or 403(b) account.
Build a rainy day or emergency fund
Rainy day and emergency funds are buffers to help in case of unexpected expenses. For example, things like medical bills or new tires on a car. By having this money set aside, you receive peace of mind knowing you can cover unplanned costs without taking on debt. You should aim to set aside six months' worth of expenses.
Pay down debt
If you have existing debt, you may want to focus on paying it down. The sooner you pay down debt, the more you’ll save in interest. Paying down debt can provide you with the financial flexibility needed to start working toward your other goals, like saving for retirement. Consider the debt avalanche and debt snowball methods to help you figure out which debt to pay off first.
Evaluate your long-term goals
Not only should you be considering your short-term goals, like funding an emergency fund by the end of the year, but you should also be considering the big picture as well.
For instance, you can set financial New Year's resolutions to:
Double-check the beneficiaries on your accounts
Purchase a life insurance policy
Figure out when you want to retire and how much you want to have saved
A certified planner can offer financial advice to help you better prepare your estate and assets for the future.
Tips for setting your financial New Year's resolutions
It’s important for you to set financial New Year's resolutions. But, it’s even more important that you keep them. Unfortunately, Americans aren’t great at keeping their New Year's resolutions. Studies show that a mere 8% of Americans keep their resolutions throughout the year, and 80% of Americans don't keep their resolutions through January.
Fortunately, there are some things that you can do to increase the likelihood of keeping your resolution. Below are some tips to help you reach your goals and find financial success.
Trying to change too much at once is a recipe for disaster. There’s a good chance that you'll grow overwhelmed trying to reach too many goals at once.
Instead, start small and focus on one or two things you'd like to change. Positive changes can drastically improve your financial situation, even if they are smaller in scale.
Set SMART goals
SMART goals are:
For instance, instead of creating a savings goal like, "I want to build my net worth," you could better define it by saying, "I will boost my retirement savings by putting 1% of my gross pay into an investment account each pay period."
Don't get discouraged
Developing and sticking to a financial plan can be difficult. This is especially true if you’re doing things like changing your spending habits or putting money into a retirement account for the first time. Along the way, there are bound to be hiccups.
Should you run into road bumps, try your best not to be discouraged. It’s OK if you slip up. Remember, if it were "that easy," you would have done it already. Should you not meet your goal, take a step back and evaluate why this happened and what you could have done differently to prevent it. Then, with that self-reflection in mind, try again to keep making progress toward your goal.
Use the new year as a financial reset
The new year offers a tremendous opportunity to reset your finances and put new goals in place. Setting financial New Year's resolutions can help you make positive changes and improve your personal finances.
You may run into road bumps along the way, but that is OK. Change is not easy, but setting SMART goals can help hold you accountable. Remember to stay diligent and patient. If you have a slip-up, try to figure out why it happened, and then work to prevent it from happening again.
If paying down credit card debt is one of your resolutions, check out Tally†. Tally is a credit card payoff app designed specifically to help you pay down your credit card debt quickly and efficiently. By paying down your debt, you potentially gain the financial freedom needed to start saving and reach your other goals.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.