It’s that time of year again, recovering from the indulgences of the holidays, looking over the past year, breaking out the new calendar, and planning to do better in all aspects of life in the coming year. One of the most popular resolutions is to be better with money. The challenge, of course, is sticking to it. Here are some tips for setting a financial goal and, most importantly, reaching it.
1. Set a Clear and Achievable Goal
Just saying you are going to save more or spend less doesn’t provide a goalpost to reach and vowing to pay off $100,000 in student loans this year when you only make $45,000 a year isn’t realistic. Instead look out towards the future and set short-, mid-, and long-term goals. Goals should not only be practical, having fun and exciting goals to look forward to will help keep you on track when things seem overwhelming. Break down larger goals into smaller parts to make them more manageable. Once you know your goals and when you’d like to achieve them by, you can calculate how much you need to save.
2. Organizing and Paying Off Debt
Don’t let your debt overwhelm you or cause you to give up. Creating a plan to pay off debts will help to prioritize which debts to pay off first and how long it will take. Make a list of all your debts and place them in order from highest interest rate to lowest. To save the most money, send extra cash to your obligations with the highest interest rate first while continuing to pay the minimums on all your other debts. Or, if you want to see progress more quickly, focus on paying off the cards with the smallest balances first. This method won’t save you as much money, but you will see quicker progress which can be a motivating factor to keep going. In either case, once one debt is paid off, you can take the money you would put towards it each month, add it to the minimum payment of the next one on your list and fast-track your way to living debt-free.
3. Create a Budget
A budget doesn’t have to be fancy; the key is developing a plan that you can live with, and that ensures your expenses are not higher than your income. Gather together all of your financial information. Finding this information should be easy if you use an online Personal Finance Manager, but if not just make a list that includes:
- All of your sources of income
- Your fixed monthly expenses
- Any variable expenses
- How much you plan to save each month
Total your expenses and target savings. If this number is less than your total income, you’re in good shape and can use the excess for additional savings, paying off debt or treating yourself. If you have a higher expense total than income, figure out where you can make changes to balance out the equation.
4. Protect Your Credit
Monitor your bank and credit card statements and shred sensitive documents with personal information before throwing them away. You are entitled to a free report each year from each of the three bureaus and can order them through annualcreditreport.com. Review your credit for any abnormal activity and dispute any errors. If you’re concerned that you may be at risk for identity theft, look into a service like IDSafeChoice that provides identity theft detection and recovery for Service Credit Union members.
5. Save More / Spend Less
It may sound like a no-brainer, but living within your budget can be tough. Little tricks that can help reduce expenses or pad your savings can be just the morale boost you need to keep going. If your bills are out of control, take a look and cancel the services you don’t use or need. For services like mobile phones and cable, call and ask if they have any better packages, discounts or rates to offer. Collect your change and put it towards a coffee gift card at the end of each season. Set an allotment of your paycheck to automatically transfer to your savings each month so that you’re not tempted to spend it. Mark “no-spend” days or weekends on your calendar where you don’t do anything that isn’t free. Take advantage of any employer-matched retirement savings to help you reach those goals quicker.
It may seem like resolutions are only made to be broken, but don’t give up. As you find yourself getting closer to your goals, sticking with your plan will become more natural, and at this time next year, you’ll be excited to set new goals for the upcoming year!