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It has been a harsh year for most of us. With the unexpected hit of the pandemic, many people are facing financial constraints. However, it is time to start afresh as the New Year is around the corner. We can work towards our financial goals for the coming year by preparing ahead this season with our financial new year resolutions.
Still worried about how to move about with your finances? We got your back with ten financial New Year’s resolutions for you to set now and achieve. Let’s step into 2021 with a proper plan to take care of your expenses and finances!
1. Create a personal budget that you can adopt
Most of us decide to follow a budget plan to take care of our expenses. However, we often end up creating a budget that would restrict us from spending any money. For 2021, you could set it up based on your financial goals.
Here are a few tips to start your personal budget as part of your New Year resolutions!
- Start by noting down your expenses in a notebook, planner, spreadsheet, or your smart gadgets. You can use them as a guide for finding affordable things.
- Prioritize your necessities. You can divide them into different sections. You can list them as housing, utilities, transportation, insurance, debts, retirement plans, medicine, household, personal care, food, etc.
- Once you categorize your expenses, you can get a picture of where you spent more money. You can use it to cut down unwanted expenditure.
- You can keep aside money for investments and savings as well. It is a great way to secure your future and avoid financial problems.
- It is also essential to stick to your budget. You have to note down your expenses regularly. You have to cross-check it weekly as well as monthly.
If you plan to begin budgeting as part of your financial New Year Resolution, try to find a reason to start it. It could either be to pay off your debts or to purchase a new house. Once you have found the right budget plan for you, it will help you move forward without any hassle.
Don’t make your budget super strict. Always give yourself some allowances for entertainment and fun as well!
Related Post: How to Create a Personal Budget: A Beginner’s Guide
2. Boost your investments and retirement plans
You can add starting investments or opening a savings account to your New Year resolutions. It is a great way to keep your money safe.
Though most of us might have savings accounts, we don’t often consider retirement plans. Moreover, if you have not yet started any of the above, you can kickstart your New Year journey. The basics are simple.
- You have to get a good picture of what investment or retirement plans are.
- You have to figure out how much money you are planning to invest every month. It is always better to save or invest 6% of your salary. You can use online calculators to find the amount you have to save or invest every month.
- You can start by working on a budget and keeping track of your expenses. It is a great way to allot money for your savings or investment accounts.
- If you are planning to invest, you have to set a goal or purpose beforehand. It could either be purchasing a house or going on a world trip.
- You can open a bank account and choose your index fund. Always remember to invest or save responsibly.
- You can opt for the automatic transfer option so that you don’t have to worry about making transactions every month.
Most companies offer a 401(K) plan to their employees. It takes a percentage of your pre-tax salary into a savings account. If you are self-employed, you can form Individual Retirement accounts. You can also depend on 101(R), and SEP IRA plans to save money. So, why don’t we start an investment or retirement plan as a part of our New Year resolution?
3. Consider paying off credit card debts
Around 61% of Americans use credit cards. They have an average balance of $6194. Most of us have more than one credit card.
As per the data, an average American has at least four credit cards with him or her. Paying off your credit card bill is a great relief. It is one of the most popular financial resolutions as well. There are different benefits to paying off your credit card debts on time. They include,
- If you pay during the introduction period, it is helpful for your payment history.
- It also aids in improving your credit score.
- It reduces interest rates and utilization rates as well.
Different methods to pay off your credit card debts
It is necessary to find the total amount and interest rates. You might have different debts to pay. Therefore, it is essential first to set your financial goals and make payments accordingly. You could have a credit card, auto loan, student loan, housing loan, etc. You can start by listing down your debts.
If you plan to clear your credit card debt first, you can adopt either of the two methods. Let us have a look at the most recommended methods suited for every credit card holder!
- Avalanche method – It is the smartest way to pay off your credit card debts. Here, you can start by listing down the interest rates on your credit card debts. Furthermore, you can then begin by paying off the one with the highest interest rate. Moreso, continue until you reach the one with the lowest interest rate.
- Snowball method – It is the approach in which you pay off the bills with the smallest balance. You can then proceed to the ones with the highest balance.
Here are some tips you can consider while paying off your credit card bills.
- List your debts beforehand.
- Opt for credit cards that have lower interest rates.
- You can use a balance transfer credit card. It is a suitable option as it does not offer any interest for up to 21 months.
- You can start by forming a budget and try to pay your credit card debts on time.
- Reduce the number of credit cards you have to lower your debts.
- You can decide not to take any new credit cards for the coming year.
Through these methods, you can find the right way to pay off your credit card debts as part of your financial New Year resolutions. All you have to do is include these steps as part of your money resolution for the New Year to take control of your expenses.
4. Increase your credit score
Maintaining a good credit score is as essential as paying off your credit card debts. If you have not yet considered it, you can include improving your credit score as part of your financial goal. There are a plethora of benefits to having a good credit score. They include:
- It helps in saving you money on interest fees and loan debts.
- Influences your car insurance rates.
- It can aid you in getting access to other financial services.
- Increases your chances of landing your dream job.
- It is also helpful when you are moving from one place to another. It gives a good impression of your financial stability to the new landowners.
So, by including improving your credit score in your financial New Year resolutions, you can gain a lot of benefits. However, most of us don’t have a clear idea of how to increase our credit scores. Let us look at some of the ways you can include as part of your money resolutions!
- Making on-time payments on your credit card debts.
- Consider reducing your debts. You can do this by following a proper budget and investment strategies.
- Reduce your credit utilization. You can do this by making lesser payments with your credit cards.
- You can also stay on track by regularly checking your credit reports.
- Repair your credit score by using a professional service like CreditFirm.net
If you can include these measures as part of your financial New Year resolutions, you can improve your credit score.
5. Paying off student loans
Similar to paying off your credit card bills, it is necessary to repay student loans on time. It is an essential factor you can include in your financial goals.
You can start by noting down the total amount and its interest rates. You can add them to your budgeting to keep track of the interest and amount. If interest rates are high, consider consolidating your loans to reduce your interest rates.
Parents, while planning for their children’s future, can invest in a 529 savings plan. You can also take up part-time jobs like freelance writing, blogging, virtual assistants, and social media managers to make the payments.
6. Get appropriate insurance
Having an insurance plan is a great relief. If you have been considering taking one for too long, you can include it as your financial New Year resolution.
You have to find out the type of insurance you require. It could be rental, homeowner, health, auto, disability, pet insurance.
It is also essential to find the right insurance plan before you commit to it. You can also consider checking for lower insurance rates.
7. Starting a new business / Side Hustle
Due to the pandemic, many people have lost their jobs. Many have considered starting a new business. If you have been planning on it, 2021 will be the right year to kickstart it.
- Add it to your New Year resolutions and start working on it.
- You can start with research and brainstorming.
- Create a business plan.
- Try to dedicate time to your business every week.
- You can also take up some side hustle to make extra money.
8. Try to spend less and create a financial goal
Most of us would have drained our salary within a few weeks. It is essential to keep track of your expenses and spend less. You can always begin by creating a financial goal.
It could be a short term or a long term goal. You can first set it up and start to organize your expenses.
Furthermore, you can always start by spending less. The best way to spend less is to cook food for yourself, avoid unnecessary shopping sprees, etc.
Related Post: 10 Steps to Creating a Solid Financial Plan for Yourself
9. Start an emergency fund
An emergency fund is a great way to overcome unexpected financial crises. It could be the loss of a job, medical needs, or others.
You can create an emergency fund as part of your financial goal. Here are some tips to consider for this purpose.
- You can start slowly by setting aside an amount every month.
- It helps you not to run into debts in case of emergencies.
- You have to save enough to look after your expenses in case of an emergency.
- You can transfer the amount using the automated transfer method. It is a way that helps to decrease the chances of spending it otherwise.
Related Article: How To Build An Emergency Fund: Why You Need One & How To Fund It
10. Start saving to make large purchases
You might have been thinking of purchasing a house or a car for some time. However, with the ever-increasing expenses, it is hard to buy them easily.
More so, most of us rely on loans and mortgages for such large purchases. However, you can reduce it by taking small steps. As part of your financial New Year resolutions, you can start saving money to make such purchases. Above all, you can reduce the amount you take as a mortgage or loan as well.
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Financial new year resolutions are a great way of achieving financial success. By setting these ten financial New Year resolutions, you can move forward into the coming year with financial security and stability.
Finally, it’s the best time of the year to sort out our finances and start fresh. So why don’t we plan our financial goals accordingly and make 2021 a stable fiscal year?
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What’s your Financial New Year’s resolution?
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