December is a time for merrymaking, gift-giving, and basking in quality time spent with loved ones. It’s also the perfect time to reflect on the past year and to plan for the one ahead. As we approach January 1, it’s natural to think about how we can better ourselves in the year to come. Some of us want to do a better job of detaching from technology. Others want to make healthier choices for our bodies. I, personally, would like to take some online courses to further my career. While these are all legitimate and admirable ways to enhance our well-being, there is one major bucket that most of us neglect in our new year’s resolutions: financial health. Healthy finances empower us to live well in all other aspects of our lives, so they deserve our focus too. Keep scrolling for some financial resolutions that you will definitely want to keep this year.
Save For Retirement
For a lot of us, retirement seems like a distant, intangible event. We’d much prefer to focus our time and savings on near-term expenses and indulgences. But putting money away into a 401(k) or an IRA sooner rather than later can make a world of difference. That’s because compound interest exponentially grows your savings as you accrue interest on top of interest. If you have an employer-sponsored retirement plan, start by contributing at least what your employer will match so you’re not leaving money on the table. If you have some flexibility, consider saving above this minimum. In this case, time really is money.
Create A Budget
Oh, the dreaded “B” word. Trust me, setting a budget isn’t that bad because it doesn’t have to mean giving up the things that make you happy. The right kind of budget should empower you rather than restrict you. It should allow you to enjoy spending your hard-earned money but also enable you to save just enough. The 50/20/30 budget is my favorite because it builds in the proper flexibility. Here’s how it works: 50% of your monthly after-tax income goes toward living expenses like rent, car, and utilities; 20% is for financial goals like paying down debt and saving for retirement; the last 30% is for totally discretionary purchases. There’s no need to give up your girls’ nights, your daily espresso indulgence, or even that new pair of shoes.
Track Your Net Worth
If you don’t have a good sense for your net worth, now is the time to start tracking it. Your net worth is a metric that represents your entire financial position. You can calculate it by tallying everything you own (cash, savings, investments, real estate) minus everything you ow (credit card debt, student loans). You could calculate this on the back of an envelope. The problem is that your money situation evolves as you save, spend, and make important life decisions. I like to use Personal Capital to show me an accurate picture of my net worth at any given time. This free tool consolidates your financial accounts on one dashboard and makes it easy to track your financial health over time.
Boost Your Credit Score
Your credit score is an important number to know and should be a key area of focus for the new year. This one number reveals a lot about your reliability as a borrower. It determines whether you’re approved for a credit card, your ability to rent an apartment, the interest rate on your mortgage, insurance premiums, security deposits, and even your next job application. As you might imagine, having a solid score can make your life a whole lot easier. Apps like Credit Sesame and Credit Karma provide access to your credit score and share customized tips to raise it. Now that your score is free and accessible, there’s no excuse not to monitor it.