by Christy Bieber | Feb. 25, 2019
The start of a new year is a great time to set goals for yourself. In fact, studies have shown people who make New Year's resolutions are more likely than non-resolvers to achieve objectives they set out to accomplish.
If you're not sure where you should start when it comes to your resolutions, check out this list of 10 financial goals you may want to set for yourself. If you're not already doing these things, resolving to start some new habits in the new year could make a huge difference in your financial future.
Just 35% of people live on a budget, according to a Willis Towers Watson survey. If you aren't living on a budget, you're less likely to know where your money is going and more likely to experience financial stress. Your money also probably isn't working as effectively as it could for you since you aren't giving it a job to do.
You don't have to make a super detailed budget that specifies where every dollar goes -- although this is certainly an option that works for some people. But, you should have an idea of what you're spending your money on and set some spending limits for yourself. You could try out a 50-30-20 budget, for example. This involves keeping your needs to 50% of your budget, your wants to 30%, and saving 20%.
To make a budget, start by tracking spending for around 30 days so you know where your money is currently going. Then, set new limits -- being as detailed or as vague as you'd prefer -- to make sure you're allocating your money in the right ways.
Almost everyone has something they're spending money on that isn't providing them with good value.
Your frivolous spending may come in the form of a gym membership you don't use; cable TV you aren't watching much; or expensive lunches out every day at work that you don't really enjoy.
Take a close look at where your money is going and find some places to cut. You work too hard for your money to waste it on things that don't bring you joy or help you to achieve important financial goals.
If you're in debt, you're wasting money on interest and making your creditors rich. Not only are you making all your purchases more expensive by paying interest on them, but you're also paying a big opportunity cost since the money you're spending on interest can't be used for other, better things.
It can be hard to swear off debt and to climb out of the hole if you owe money on credit cards, personal loans, or high-interest loans such as payday or car title loans. But, if you want to get ahead financially, you'll need to make the effort.
To get started, figure out the total amount you owe and decide which debt to pay off. There's typically no real rush to pay off low-interest mortgage debt since you may be able to earn higher interest rates investing your money than you're paying on these loans. But, credit card debt, personal loans, medical loans, and other higher-interest debt should be on your payoff list.
Once you know which loans you want to pay, work your budget to free up as much cash as possible for debt repayment. Then, decide on either a debt snowball or debt avalanche approach to paying debt and start sending as much extra money as you can either to your highest-interest debt or your debt with the lowest balance.
Ideally, by making extra payments, you'll be well on your way to getting out of debt -- or could even become debt free -- by the end of 2019.
Most people aren't saving enough for retirement. You don't want to be one of them. You should aim to save around 15% of your income for your golden years, including any employer match provided for your 401(k). Chances are good you're nowhere near this number.
It may be too hard to just suddenly jump up to saving 15% of income right away. But, resolve to increase the contributions you're currently making. Even upping the amount by 1% or 2% could make a big difference in the long term. So, talk to HR about increasing automatic transfers from your paycheck to your 401(k). Or, if you're contributing to an IRA, you can have your brokerage firm take automatic contributions from your bank account on payday for the desired amount.
If you slowly increase the amount you contribute a little bit at a time, you won't miss the money much -- and you can work your way up to saving enough to be financially secure in retirement.
Do you know what your portfolio is invested in?
It's important to make sure you have an appropriate mix of different assets so you don't put all your eggs in one basket. Unfortunately, if you aren't paying much attention to your investments, you may have an unbalanced portfolio. This can happen if some of your investments have performed much better than others, or if you didn't pick the right mix of investments in the first place.
Make it a point this year to look a little more closely at your accounts in 2019 to ensure your money is spread across different markets and industries. For example, you may want to be invested in both the U.S. market and foreign markets, and you may want to be invested in large caps, small caps, bonds, and real estate.
ETFs and mutual funds can make it easy to diversify, or you could consider entrusting your funds to a robo-advisor if you don't want to be bothered actively managing your portfolio.
Do you know what 401(k) fees you're paying? Have you checked how much the fees are on your mutual funds or ETFs you're invested in? Do you know how much commission your brokerage charges you to buy and sell assets?
It's important to know the answer to all of these questions because investment fees can eat into your earnings. In fact, you would need to invest thousands of dollars more to make up for high fees.
If you don't know what you're paying, talk to your 401(k) administrator, check with your brokerage, and check the prospectuses or disclosures that come with your investments to find out the costs you're incurring.
If your investment fees or commissions are above average, consider switching to a cheaper brokerage or fund. And, if your 401(k) costs are too high, you may want to limit contributions only to the amount you need to max out your employer match. Then, put the additional funds into other tax-advantaged accounts, such as an IRA, where you don't have to pay fees just to have an account.
You may have a broader choice of investments in an IRA at a brokerage firm than a 401(k), so you could potentially cut both your account fees and investment fees by switching some of your contributions to an IRA.
Far too many Americans go months without checking their credit, or never check it at all. This can be a big problem, with as many as 1 in 5 credit reports containing mistakes, according to the Federal Trade Commission.
If you don't check your credit report and there's an error on it, that mistake could reduce your credit score and cause you a host of serious issues.
Your credit report is checked by many people you want to do business with or enter into a relationship with. Landlords, cell phone companies, utility companies, potential employers, and lenders are just some of the many people and companies that check your credit. And, they could all get an inaccurate impression of who you are as a borrower if your credit report contains errors.
You don't want to be denied financing, lose a job or an apartment, or have to pay more for credit because there are errors on your credit report you don't know about -- so you need to check your credit on a regular basis.
You should also make it a point to check your credit report so you can catch signs of identity theft early. The longer it takes to find out someone is inappropriately using your personal information, the harder it is to fix all the problems identity thieves can cause. If you take action early as soon as you spot unusual inquiries or accounts you didn't open on your credit report, you can stop identity thieves in their tracks before they do too much damage to your credit.
There's no excuse not to check your credit report regularly when it's free to do and takes just a few minutes. Visit AnnualCreditReport three times a year and each time you do, you can pull one of your credit reports for free from each of the major credit reporting agencies (Equifax, Experian, and TransUnion). That way, you'll check your credit every few months and will always know what's going on with your credit report.
Since your credit score impacts so many financial transactions, you want this score to be as high as possible. So, why not resolve in 2019 to take some steps that could boost your score?
Making payments on time, all the time, is one of the most important ways to keep your score high. That's because payment history is the single most important factor in determining your score.
If you've never paid late, keep up the trend in 2019. But, if you've fallen behind in the past, make a plan to ensure at least minimum payments are made on time every time. You may also want to consider writing a goodwill letter to a creditor if you have one late payment marring an otherwise good credit report. Your creditor may be willing to remove the record of the late payment from your report if you've been a pretty good customer.
You can also boost your credit score by paying down debt to improve your credit utilization ratio, which is the amount of available credit you use relative to the credit available to you. Asking for credit line increases can also help to boost this ratio, which should be kept as low as possible. If your credit utilization ratio exceeds 30%, this can hurt your score quite a bit -- but lower is always going to be better.
Finally, you can avoid opening new accounts -- so you don't get too many inquiries -- or closing old ones, as the average age of your credit is a key factor in determining your score.
Chances are good you have at least one credit card with a rewards program. If you do, make 2019 the year you maximize your credit rewards. You can do this by learning more about how your program works, and by making sure you redeem all the points available to you.
If your credit card offers bonus points for certain kinds of spending, be mindful of that when you make purchases. For example, if you're buying gift cards as a present and your card gives you bonus rewards for shopping at a gas station, you may want to make your gift card purchases there.
Your credit card company may also provide you with bonus offers or extra cash back if you sign up online or shop through the card company's online portal. Sign into your account or ask your creditor if you have opportunities to boost your points, cash back, or miles with this kind of strategic shopping.
Finally, if you're getting a tax refund for the 2018 tax year, vow to change your withholding in 2019 so you don't get a refund in the future.
While getting a refund may feel good at the time, you've given the IRS an interest-free loan and locked up your money for months, losing the opportunity to use it to pay down debt or save for your future. Don't give the IRS free use of money that belongs to you. Have only the amount taken out of your checks that you owe, and keep the rest to put it to good use.
These resolutions are designed to help you stop wasting money and to put your cash to much better use. If you make -- and achieve -- even a few of them, you're likely to be in much better financial shape going forward. Give it a try and make 2019 the year when you get some big money goals accomplished once and for all.
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