Starting a new year can be a time of rejuvenation and recommitment to getting things done that have been on the “to do” list way too long. We all have good intentions when we make our New Year’s resolutions, but too many resolutions can be a recipe for failure. Consider picking one of the four financial resolutions listed below and commit to doing that one thing. You’ll feel great when you accomplish your goal AND you’ll have moved yourself forward in your financial life.
Pay down (or better yet, pay off) your credit card debt.
Credit card debt is usually the most expensive debt you carry. A 2016 American Household Credit Card Debt Study reported that for households that carry credit card debt, it costs them about $1,300 a year in interest. Wouldn’t you love to have that extra $1,300 in your savings instead of paying it to your credit card company? Make a concrete goal to be free of credit card debt, such as “I will pay an extra $100 on my credit card balance each month until I get the balance down to zero.”
Pay your bills on time.
An important factor that is considered in your credit score is having a positive payment history and the best way to have a positive payment history is to pay your bills on time. Have you ever stacked your bills in a pile and procrastinated paying them? We’ve all been there. But paying bills on time can help increase your credit score, and higher credit scores translate into better interest rates when you need a personal loan. Consider setting up automatic payments for your bills. If you’d rather write checks to pay your bills, commit to paying the bills regularly on a certain day every week. It makes a difference!
Add one month to your emergency fund.
Having a 3- to 6-month emergency fund is recommended by most financial advisors. Maybe you’ve started a separate account for life’s curveballs, but haven’t reached the 3- to 6-month goal yet. Let’s say you need $3,600 for one month of expenses. Resolve to save $300 per month in your emergency fund this year. By the end of the year, you will have added another one-month cushion to your savings. Haven’t started an emergency fund yet? Resolve to start one with a 2018 goal of having enough money to cover 1 to 3 months of expenses by the end of the year.
Add a percent or two to your retirement savings.
An easy way to build your retirement account is to add small increments at a time. Resolve to add 1 percent more to your retirement savings in 2018. If you are currently saving 6 percent, bump it up to 7 percent. If you do this each year until you get to 15 percent of your gross salary, you are well on your way to a happy retirement. In 2018, you are allowed to contribute a total of $18,500 to your 401(k) or 403(b) retirement account. If you are 50 years old or older, you can contribute an additional $6,000 catch-up contribution for a total of $24,500.
Andrea L. Blackwelder, CFP®, ChFC and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with Wisdom Wealth Strategies.