5 Important Financial Goals You Should Tackle in the New Year
Does your list of New Year’s resolutions include improving your personal finances in order to reach your long-term financial goals? Effective money management requires creating a game plan and conducting regular check-ins to help you meet your goals. As we head into 2022, this is the perfect time to evaluate your financial situation and set yourself up for financial success in the new year.
Take control of your finances with the following five steps
Did you overspend last year, or were you able to stay within your budget? Look at the specific areas where you spent the most and see if you can find a pattern. For instance, did your spending increase due to travel, or did you consistently stop at the coffee shop during your morning commute? See if you can budget for these expenses and more to avoid surprises, or if some added purchases are hurting your wallet, see if you can cut back on added spending. It’s important to create a monthly budget in order to keep track of your expenses such as your rent/mortgage, car payment, gas, groceries, and other expenses that inevitably come up. When you keep track of your monthly expenses, you can find out how much you are able to realistically save for an emergency fund and a retirement plan. A monthly audit of your budget will help you to effectively reach your financial goals.
Did you know that 40% of Americans don’t have enough savings to cover a $400 emergency? Saving is vital for your financial health and will assist you in your long-term financial goals. If you created savings goals in 2021, check to see if you achieved them, and celebrate those wins! If you didn’t meet them, don’t beat yourself up because you can audit your finances to see why you didn’t meet your savings goals. Was it due to overspending, or were your goals out of reach? Recognize where you fell short so you can learn and improve. Building an emergency fund should be your priority. Experts suggest having three to six months of income saved up. Once your emergency fund has been met, you can start saving for your other life goals, such as a down payment on a home, that vacation you’ve dreamt of, a 401K savings plan or college tuition. You have the chance now for a fresh restart on your finances and that includes creating realistic goals for your savings in the new year.
Is your debt getting out of control? Assess any debt you have such as credit cards, car payments, student loans, etc. Choose a repayment strategy, such as paying down debt with the highest interest rates (usually credit cards have the highest interest rates). You can also use the snowball method to pay off the smallest balance first. You can investigate consolidating debt through a refinance on your mortgage and/or your student loans. Debt can be difficult to tackle, however, there are ways to break it down to manageable pieces to be one step closer to financial freedom and your long-term financial goals.
Your creditworthiness is a critical factor in assessing your financial health. That’s why it’s so important to view your credit report at least once per year to make sure it's accurate. It also helps to protect you against identity theft. If you notice accounts that you didn’t open, report them to identitytheft.gov. And if you spot credit reporting errors, ask the credit reporting agency to correct them. You’re entitled to one free credit report each year, which you can request from annualcreditreport.com.
Now that you’ve gained the knowledge to set yourself up for financial success, watch how your financial goals are reached and how you can expand on your current goals in the future. Taking the time to review your finances often will assist you in continuing to reach your goals and to build upon your wealth. Remember to check back in periodically to make sure you’re staying on track with your savings and/or debt repayment plans.
Now enjoy the benefits of your hard work!
© Nebraska Realty 2024. All rights reserved.
