It's New Years 2020: Time for Financial Resolutions!
Every year, many Americans make resolutions intended to improve their lives: resolutions regarding their exercise and eating habits, their activities, and their goals, not only for the coming year but for the future as a whole. 32% of Americans make resolutions that are intended to help improve their financial state.
As many as 80% of those resolutions have already failed by February.
Whether you've gotten caught up in the holidays and engaged in a little more overspending than intended or you're looking for a way to get out of debt and see a better financial future for 2020, this New Year, try some financial resolutions that might just stick--and create patterns and habits that will help make this year a brighter one.
Resolution #1: Track Your Spending
One of the biggest problems many people have in their finances is that they do not actively realize how much they're spending. In fact, 44% of families making more than $75,000 per year--and 77% of those in that income bracket under 30--are living paycheck to paycheck. Why? Primarily because of impulse and lifestyle spending: eating out, entertainment, and impulse purchases that they don't really need.
Start 2020 off right by committing to tracking your spending. Write down every purchase you make and where you made it, whether it's a $15 lunch, a $10 coffee stop, or a $200 grocery store run. Then, at the end of each month, review your spending. Add up some of those purchases, including impulse purchases. Take a look at where you're spending money that you don't really need to spend--and commit to cutting back on some of those expenses. Often, just realizing where you're spending more money than anticipated can help you cut back.
Resolution #2: Pay Down Debt
If you struggle with debt, you're not the only one: 87% of American households have some type of debt, from student loans to mortgages and credit cards. Getting out from under the weight of that debt, however, can help you experience much greater financial freedom. This year, take steps to help reduce your debt level:
- Take a look at your debts. Commit to paying off the highest-interest debt first, paying a little extra down on it each month. Or, if you need to see progress to stay motivated, consider paying down the lowest debt first so that you can move on to the next one.
- Look for ways to avoid future debt. If you're trying to get out of debt, you don't want to dig the hole deeper by taking out further loans! Instead, try to make purchases within your means, whether that means choosing a cheaper, used car that you can afford or putting down your credit card and passing on purchases that you don't need.
- Commit an additional amount to pay down debt each month. As you observe your other spending habits, you'll often find unexpected places where you can cut down on spending. Commit that amount to pay down your debts each month.
- Consider consolidating your debt payments. If you're struggling to deal with your debts, whether missing payments or struggling to make payments on time, consolidating those debts can make it easier for you to pay off those debts at a reasonable rate. In some cases, this can reduce the weight of your debt and allow you a higher degree of financial freedom.
Resolution #3: Build Your Savings
One of the most significant steps to financial freedom is building a savings account that will allow you to take care of emergencies when they arise--or, occasionally, to manage desired purchases. Try some of these strategies for building your savings throughout 2020:
- Start by building an emergency fund. An emergency fund of at least $1000 can make it easier for you to handle many of the disasters that could come your way, from unexpected car repairs to minimal medical emergencies. A larger emergency fund can provide a cushion when you face job loss and other challenges.
- Make sure you're saving toward retirement. Choose a savings strategy that will allow you to build savings toward your future. If you aren't already contributing to your retirement accounts, commit to starting those contributions in 2020. If you already contribute toward your retirement, consider raising the amount you're contributing by just 1% in the coming year.
- Set up separate savings accounts for big "want" purchases. There's a big difference between a purchase that you need--replacing a broken vehicle when it provides your only source of transportation to work, for example--and a purchase that you want: the latest game system, for example. Set up a separate savings account for those "want" purchases: the big things that you may need to save for, but that you don't need immediately.
Resolution #4: Do Your Research
No matter how hard you're trying to be financially responsible, there will be times when you make splurge purchases--and realistically, the harder you tighten your budget, the more likely you are to over-splurge. This year, no matter what your other financial resolutions, commit to doing your research before you make a purchase.
You might, for example, get better prices on movie tickets if you go at a specific time, often off-peak.
You might be able to get a better deal on a major appliance by shopping around--or, in doing your research, you might discover that you can spend a little more for a much more reliable machine.
For 2020, commit to researching purchase options before making any purchase over a certain amount. That doesn't mean you have to hit the internet every time you want to purchase a coffee, but any time you make a purchase over a certain threshold determined by your budget, take the time to research available options and choose the one that's right for you. This can also help prevent you from making impulse purchases that could completely blow your budget.
Are you committed to managing your finances more effectively as part of your 2020 resolutions? If you need help dealing with your debt, including consolidating debt so that you can deal more effectively with those payments, contact us today to learn more about how we can help--and start planning a brighter financial future for 2020.