With rising interest rates, still-high inflation, worries about layoffs and the broader economic landscape in general, it makes sense that resolutions focused on money are foremost in the minds of so many people. Given all that, it’s a now time to reflect on our financial goals and set resolutions to improve our financial health. Whether you’re looking to save more, reduce debt, or start investing, here are the top 4 financial resolutions you should make this year:
1- Create a budget and stick to it
“Update your budget to make sure you are spending less than you are bringing home. Otherwise, you’ll be building debt,” Barrington said. “That just adds interest expenses on top of higher prices.”
One of the most important steps you can take towards financial stability is to create a budget that takes into account your income, expenses, and financial goals. A budget can help you better manage your money, identify areas where you can cut back on expenses, and ensure that you’re on track to meet your financial goals.
To create a budget, start by tracking your spending for a few months to get a sense of where your money is going. Then, create a budget that allocates your income towards different categories, such as housing, food, transportation, and entertainment. Make sure to include savings goals, such as an emergency fund or retirement contributions.
The key to sticking to a budget is to make it realistic and achievable. Be prepared to make adjustments as needed, and commit to tracking your spending regularly to ensure that you’re staying on track.
2- Build an emergency fund
Life is full of unexpected expenses, such as car repairs, medical bills, or job loss. Building an emergency fund can help you weather these storms without going into debt or derailing your financial goals.
Aim to save at least three to six months’ worth of living expenses in a separate savings account that is easily accessible in case of an emergency. To get started, set up automatic transfers from your checking account into your emergency fund each month. Even small contributions can add up over time and provide peace of mind knowing that you have a safety net in place.
3- Start investing for the future
Investing is one of the most powerful ways to build wealth over the long term. If you haven’t already, start investing for the future, whether it’s through a retirement account like a 401(k) or IRA, or through a brokerage account.
Consider working with a financial advisor to help you develop an investment strategy that aligns with your goals and risk tolerance. Make sure to diversify your portfolio by investing in a mix of stocks, bonds, and other assets to help reduce risk.
Remember that investing is a long-term game, and it’s important to stay committed to your investment plan even during market downturns.
4- Reduce debt
High-interest debt can be a major drain on your finances and can prevent you from achieving your financial goals. Make a plan to pay off any high-interest debt, such as credit card balances or personal loans.
Consider using a debt payoff method like the snowball or avalanche method to help you stay motivated and make progress towards becoming debt-free. The snowball method involves paying off your smallest debts first, while the avalanche method involves paying off your highest-interest debts first.
No matter which method you choose, the key is to make regular payments and stay committed to reducing your debt over time. Once you’ve paid off your high-interest debt, consider redirecting those payments towards savings or investments to help you achieve your long-term financial goals.
By following these four financial resolutions, you can set yourself up for financial success in the new year and beyond. By creating a budget, building an emergency fund, starting to invest, and reducing debt, you can take control of your finances and achieve your financial goals.