Father teaching daughter how to save, helping put coins in piggy bank
Financial Literacy

Setting money goals is always one of the most popular New Year’s financial resolutions. Whether it’s saving more, paying down debt, or creating an investment strategy, people are thinking about getting their financial house in order to kick off each new year. But, statistics show that only about 10% of people who make resolutions feel like they succeed. One reason resolutions often fail is because they aren’t SMART goals. Here are some tips for setting SMART resolutions to help you accomplish all you set out to do this year.

1. The Importance of SMART Goals

Before you set any resolutions, it’s a good idea to think about what you really want to accomplish. Once you know that, it’s time to set SMART goals. For a goal to be SMART, it must be:

  • Specific: Be clear about what you’d like to accomplish. It’s easier to make excuses for failure when a goal is vague.
  • Measurable: Make sure you can track progress toward your goal. Goals are easier to achieve when you can look at your progress toward reaching them.
  • Achievable: Your goals should be realistic and attainable. Shooting for the stars is great, but you may have to settle for landing on the moon first.
  • Relevant: Set goals that are meaningful to you. The more you really care about accomplishing your objectives, the harder you’ll work to make it happen.
  • Timely: Set a date to reach your goals. If it’s by the end of spring, your birthday, or December 31, an end date will create a sense of urgency for you to reach them.

Setting SMART goals makes you more likely to stay motivated and achieve your financial resolutions.

2. Crafting a Budget

A budget acts as a financial blueprint, guiding your income and expenses throughout the year. If you don’t have one yet, it might be a good idea to make building a budget one of your new years resolutions. Best of all, with the budgeting tool in Best Egg Financial Health’s Money Manager, you can achieve that resolution in a snap. The tool will automatically assess your spending, show you where your money is going, create spending categories, and recommend caps for each to help keep you on track.

Adopt the 50/30/20 Rule

If your goal is to save more money, you may want to consider the budgeting method known as the 50/30/20 rule. The rule works like this:

  • 50% of your income goes to necessities like housing, food, utilities, and transportation.
  • 30% is allocated for wants such as entertainment, dining out, and personal hobbies.
  • 20% is reserved for savings and debt repayment.

Remember, this rule serves as a guideline. Feel free to adjust the percentages based on your unique financial situation.

3. Reduce Debt

Paying down debt is a common yet challenging financial resolution. A couple of effective strategies for debt reduction are the debt snowball and debt avalanche methods.

With the snowball method:

  1. List your debts in order of their balances from smallest to largest.
  2. Pay the minimum on all debts except the smallest balance.
  3. Allocate as much money as possible to the smallest debt until it’s paid off.
  4. Move to the next smallest debt and repeat the process until all debts are paid.

The debt snowball method provides a psychological boost as you see debts being eliminated one by one.

With the avalanche method:

  1. List your debts in order of their interest rate from highest to lowest.
  2. Pay the minimum on all debts except the one with the highest interest rate.
  3. Allocate as much money as possible to the debt with the highest rate until it’s paid off.
  4. Move to the debt with the next highest rate and so on until all debts are paid.

The debt avalanche method allows you to pay off debt faster and for less by attacking the highest interest rates first.

4. Establish an Emergency Fund

An emergency fund acts as a safety net, protecting you from unforeseen expenses like medical emergencies or a sudden loss of income. Building an emergency fund with money that can cover at least 3 to 6 months’ worth of living expenses is a great resolution and one you can achieve with a little effort.

5. Monitor Credit Reports

It’s a good idea to keep tabs on your credit report. You can get your credit report for free and check it anytime without harming your credit score at Best Egg Financial Health. Checking your report, at least quarterly, is a best practice and helps ensure you’re on the path to reaching broader financial goals. Checking your score every 4 months is not only a resolution that doesn’t cost a thing, but it could save you money in the long run.

6. Prioritize Physical and Mental Health

Everything is connected, and physical and mental health are closely tied to financial health. Regular exercise, quality sleep, and social connections are essential for maintaining a healthy balance in life. At the same time, the more confidence you have in your financial well-being, the less stress it may cause, thus boosting your mental and physical well-being. Setting resolutions to improve all aspects of your health is a really great idea. 

7. Explore Investment Opportunities

Investing can be a powerful tool for wealth accumulation. As the saying goes, “Don’t put all your eggs in one basket.” That goes double if you’re considering investment strategies. Consider building a diverse portfolio by investing in stocks, bonds, mutual funds, and real estate. Investments have peaks and valleys, so with a diverse portfolio, you’re more likely to stay afloat with the others when some aspects are down.

8. Plan for Retirement

No matter your age, it’s never too early to plan for retirement. If your employer offers a retirement plan like a 401(k), it’s a good idea to participate and contribute as much as you can. If your employer offers a matched contribution, at the very least, try to meet the threshold to get the full match. That’s free money. If you have an individual retirement account (IRA) or other retirement savings options, look at ways you can maximize your investments so that you can build those funds to last well beyond your working days.

9. Teach Kids About Money

If you’re a parent, teaching your kids about money can be one of the most valuable lessons you provide. Instilling good financial habits early can set your children up for financial success in the future. Talk to your kids about the value of money and explain the differences between wants and needs. Let them earn money and save up for something special. Teaching kids how to save is important. Something as simple as a piggy bank can start building an understanding of the importance of saving. No matter which methods you choose, talking to kids about money early sets them up to be more financially confident adults.

10. Give to Charity

Charitable giving can provide a sense of purpose and joy. Plus, your donations might be tax-deductible. Remember, charitable donations can be more than just cash. You can donate clothing, home goods, food, cars, or even real estate. Choose a cause you’re passionate about and make a difference in the new year.

Remember, achieving your financial resolutions won’t happen overnight. Be patient, stay committed, and celebrate your progress along the way. Here’s to a prosperous new year!

This article is for educational purposes only and is not intended to provide financial, tax or legal advice. You should consult a professional for specific advice. Best Egg is not responsible for the information contained in third-party sites cited or hyperlinked in this article. Best Egg is not responsible for, and does not provide or endorse third party products, services or other third-party content.

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