Have you already broken your New Year’s Resolution to lose weight, save money or learn another language? Don’t worry — everyday is a new start. Effective this moment forward, you can take pro-active steps to improve your situation.
While I can’t help you lose weight or learn another language (sorry!), I can offer some pointers on how to get your financial life back on-track. Here are 10 financial resolutions or goals that you can set for the year ahead.
#1: Keep Strong Emergency Funds
You never know when disaster might strike. You could lose your job. Your home or car might need a major repair. You might need to help a family member in crisis. No matter what the future holds, you’ll sleep better at night if you know that you have a strong emergency fund saved.
An “emergency fund,” as the name implies, is simply a fund that you keep in a savings account, letting it sit in cash, unused, unless you experience an emergency. It’s the ‘safety net’ that you create for yourself.
As a rule of thumb, keep 3-6 months of expenses in your emergency fund. This way, if you lose your job, you can fall back on this fund.
#2: Plan for Big Life Events
Do you have any major life events coming up in the next 5-10 years? Do you plan to buy a house? Get married? Have a baby? Retire? If so, start creating your financial plan now, rather than waiting until the event is only a few months away.
For example — let’s say that you’re hoping to get married (or to pay for your child’s wedding) within the next 10 years. Make an estimate of how much you think this will cost. Divide that number by 10. This is the amount you’ll need to save each year. Then further divide that number by 12. This is the amount you should save every month in order to stay on-track.
Once you start thinking about big life events, such as buying houses, vehicles, going to school, and more, you might be surprised to see how many long-term life events you’ll need to plan for. Start today.
#3: Pay Down Debt
You might be comfortable making minimum monthly payments on your debt — but why not push the calendar to get these loans paid off? Commit extra money towards decimating your debt, whether you have credit cards, an auto loan, student loans or even a mortgage. The faster you can pay it off, the more free you’ll feel.
#4: Set Aside “Fun” Money
Money management doesn’t need to be all work and no play. Set aside some “fun” money for holidays, spending time with friends and family, sports and recreation, and other things that you enjoy. If a holiday is too expensive, then at least set aside some fun money to dine at a restaurant once a month, or enjoy a coffee with your friends every Saturday.
Yes, we’ve all heard the financial advice that says “don’t buy lattes” — but that doesn’t mean you should give up every shred of enjoyment. These small indulgences can help you stay motivated while you work towards bigger goals like debt payoff or saving for big life events.
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