Financial New Year’s Resolutions You Should Strive For in 2017
2016’s coming to a close and this is a time of reflection. And of course, a time to make New Year’s resolutions: maybe you’re thinking about hitting the gym more and trying to eat better, promising that you’ll do volunteer work more, trying out a new hobby, or other measures for your health and personal development. But have you also thought about your finances?
Here’s some financial New Year’s resolutions that you can think about shooting for in 2017 (and beyond.)
Get serious about paying off your debts, especially credit card debt.
It becomes more freeing in so many ways to finally be rid of debt, not the least of which is that you’ll have more wherewithal to build wealth instead of just keeping the credit card and student loan sharks at bay. Debt often becomes a fact of life if you fell on hard times but you need to make it a priority to become debt-free as soon as possible, making it a very worthy New Year’s resolution. Credit card debt in particular is what keeps most Americans mired in debt for too long because it is revolving, not fixed like a loan. Unlike the bane of student loans, there are no tax benefits for credit card interest either.
If you hold a lot of debt, it could be beneficial to seek out debt consolidation so that you are paying a single interest rate on all of your obligations. In some cases, a debt settlement agency can even get your credit card or other debt wholly or partially forgiven (although there may be some tax consequences with this.) It’s also a good idea to focus on paying down your balances as fast as possible by diverting a portion of your income to your debt every month, as well as discretionary income such as moonlighting or selling unwanted holiday gifts online.
Build an emergency savings.
The gold standard for your emergency fund is that you should have at least six months worth of living expenses on hand: housing, utilities, food, insurance, transportation, and a cushion for other necessities. Depending on your income level, this may seem incredibly daunting or even impossible.
Start small. Six months of expenses can sound intimidating, so start with saving one week of expenses then graduate to one month. Cut back on expenses that are easier on you to cut, such as getting a better deal on your phone bill or shopping at a cheaper grocery store. The savings will be gradual, but they will add up.
Automating transfers to your savings for every paycheck will also make this easier as you won’t even notice a small amount like $20 being taken out each time. But if you set aside just $20 a week, that comes out to $1,040 you saved over a year. If you’re self-employed and automating savings is a scary prospect due to erratic timing of when you get paid, make a definitive savings goal and stick to it. Start small, such as saving just 2% of your income every week then upgrading to 5%, then 10%, once you’ve become more comfortable with keeping your bills and self-employment taxes paid.
Make it a priority to save more money for retirement.
It’s never too early to start thinking about retirement: in fact, the younger you are when you start saving, the better off you will be. It’s impossible to predict what your life and living expenses will be like decades from now. But if you want to retain a level of comfort close to what you have in your prime working years, you need to make saving for retirement a priority even if you can’t contribute much.
Make as many contributions to your 401(k) or other employer-sponsored plan as you can and try to get enough money in to get an employer match. Employer matches are the closest to totally free money you will ever receive.
If you’re self-employed or don’t have a retirement plan at work, open an IRA immediately to start making tax-deductible contributions. Depending on your income level, you may be eligible for the Saver’s Credit which can offer substantial tax savings based on your plan contributions. If your income is below $132,000 ($194,000 if married filing jointly) you can also sign up for a Roth IRA where the contributions are not tax-deductible but when you retire, the distributions will be.
Rue & Associates wishes you a happy and healthy New Year. We want to help you succeed in your financial goals whether they’re a New Year’s resolution or a long-term goal that you need assistance with. Contact us today to speak with one of our friendly and professional financial advisers who want to help you crush your debt and build the wealth you deserve.