And (Most Importantly) Real Tips on How to Keep Them!
Another holiday season has come and gone and we find ourselves ringing in 2023 – time to turn over a new leaf, right? If you’re thinking about sharpening your resolve and committing to something new, be prepared – New Year’s resolutions can be hard to keep – especially financial resolutions.
But this year? Well, this year is going to be different. You’re going to reach for the stars and stick to your resolutions – whatever they may be. If you want to take control of your finances with this year’s resolutions, we’re here to help.
This article offers 7 great ideas for New Year’s financial resolutions – complete with easy tips to help you keep them.
General tips for sticking to your financial resolutions
Yes, New Year’s financial resolutions can be tough to stick with. All too often, people try to change too much too fast, only to find themselves off track come February.
If you want to stick to your financial resolutions for the long term, try these four steps:
1. Be specific with your goal.
When defining and setting your goal, make sure you’re very specific about what it is exactly. Resolving to get rich in 2023 is way too vague – make it as detailed as possible.
2. Make it measurable.
The benchmark of progress is a goal’s measurability. Frame your resolution in a lens that lets you easily determine if you’re staying on track.
3. Plan reasonably.
Ambition is great – we’re here to support you, and enthusiasm goes a long way. But if you’re $50,000 in debt and plan to be included in the Bloomberg Billionaires Index by the end of the calendar year, we encourage you to re-evaluate your financial resolutions and be realistic about what’s doable.
4. Set up your environment.
If success is a lightning bolt, be like Benjamin Franklin and fly your kite in a thunderstorm. By positioning yourself in the correct environment, you’ll have an easier time sticking to your goals and finding success. We’ll look at this in a situational context later on.
Seven personal financial resolutions for 2023 – and how to keep them
Resolution 1: I will review my monthly spending
Do you loathe opening your banking app after a fun weekend, or just a few days prior to payday? You’re not alone. You can break this cycle and make your bank account a safe space by reviewing your spending every month, mitigating any surprises, and alleviating the stress and anxiety that come with financial uncertainty.
Start with these steps:
Be specific – Formulate a plan. Will you look at your bank statements on the last day of each month? Do you want to track your spending in an app? It’s up to you how to do it, but find a way to make sure you’re reviewing your monthly spending – so you can see where you may be overspending, find recurring charges you might not be using, and more.
Make it measurable – It’s important to keep some semblance of consistency when reviewing your monthly spending. Try picking a day each month on your calendar and checking it off when you’ve finished.
Plan reasonably – If you’re new to this, don’t expect to become Warren Buffett overnight. Remember, this process is about familiarizing yourself with your own spending habits, seeing what’s working for you, and changing what’s not.
Set up your environment – You’ll need to make it easy on yourself to check your finances – if it’s inconvenient (or a downright pain in the neck), you’re not going to do it. Make sure your banking or finance app is installed and current, and consider setting up a shortcut on your home screen. Face ID security is very helpful, too!
Resolution 2: I will pay down my credit card balance
Carrying credit card debt isn’t much fun at all. It impacts your credit score, decreases your spending power, and if your accounts have high annual percentage interest rates (APR), you can pay credit card companies a fortune in interest.
The good news? Paying down your credit card debt is a doable feat. Here’s how:
Be specific – You’ll need to aggregate all of your accounts, along with their total outstanding balances, their monthly payments, and the attached APR% to find out how much you owe. There are several different avenues to pay down credit card debt – find one that works for you.
Make it measurable – This one is pretty clear cut – you can watch your balances drop in real time as long as you continue to make payments. Do your best to avoid charging anything to your credit cards while you’re working to pay down your balances.
Plan reasonably – The goal here is to chip away at your debt. You do not want to spend so much money paying off your accounts that you don’t have enough left for your living expenses. A good rule of thumb is to set up a budget and pay 10% of your monthly income toward debt.
Set up your environment – Make it easy to pay off your cards by setting up automatic payments. This is especially important to keep making minimum payments on multiple accounts. Also, link your checking account to ensure you always have enough to cover your payments, and set reminders for larger payments.
Resolution 3: I will improve my credit score
While you’re paying off your credit card debt, it stands to reason that your credit score will (slowly) improve. If your credit reports have historically been less-than-stellar, there’s never a better time than now to double down on your financial resolutions and try to raise your credit score.
Whether you’re trying to afford a new car or a house within the next year or two, these steps will help you raise that score:
Be specific – Evaluate your open lines of credit and formulate a plan. Aside from paying down revolving debt (credit cards, in particular), you’ll want to ensure you continue to pay on time (35% of your score), keep balances low (30%), keep your credit cards open (15%), and avoid applying for new lines of credit (10%).
Make it measurable – Here’s another instance where this resolution is fairly easy to measure – we’re literally keeping score! Periodically check in on your score through free sites like Experian.
Plan reasonably – Even if you’re doing your very best and remaining diligent, make sure you manage your expectations and don’t expect miracles. Credit scores fall much more quickly than they rise – just stick to the plan and you’ll see your efforts pay off over time.
Set up your environment – Again, this is just setting yourself up for success. Automate your payments, keep your accounts open (even after you pay the entire balance), and try not to use your credit cards excessively. Also, consider a Credit Lock from Experian – it will prevent lenders from running your credit and affecting your score.
Resolution 4: I will build up an emergency fund
The true blue emergency fund includes enough money to cover 3–6 months worth of living expenses – rent, loan payments, groceries, etc. If you’re starting from scratch, saving for half a year’s expenses might seem downright impossible. Instead, start slow and just stash away whatever you can.
The hardest part about saving can be just leaving the money in your bank account – here are a few steps to help you leave it be and watch it grow:
Be specific – Start by deciding how much you want to save. If you want to have a few thousand on hand for any unexpected short-term surprises like an air conditioner repair or a skateboarding-related collarbone injury, plan for that. If you want to save money for 6 months of living expenses, again – plan for it.
Make it measurable – Once you create your goal, you’ll want to track it and watch your balance grow over time. You can measure your progress by determining what the balance in your savings account is versus where your goal expects you to be.
Plan reasonably – Unless you hit the lottery, you’re not going to hit your long-term goals overnight. Budget just how much you can afford to put away every month, and do your best to leave it alone. By staying disciplined and not touching the money you’re stashing away, you’ll reach your goal sooner.
Set up your environment – If you receive direct deposit paychecks, consider setting up an automatic savings function to stash away money as soon as it hits your account. Also, you can create an additional savings account to create some separation and inaccessibility! If you have a finance app like Simplifi, set savings goals to stay on track.
Resolution 5: I will save up for a house
Buying a home will be the largest purchase many people will make in their entire financial life! If you’re thinking about being a homeowner – whether someday or someday soon – you can resolve to start saving this year. It’ll put you that much closer to closing on your dream home.
If you want to prepare to put down a downpayment, start here:
Be specific – The difference between the downpayment on a $300,000 home and a $500,000 is substantial, so start by deciding just how much you can spend on a home. You’ll need to know what you can afford, how much you can budget, and make sure you’ll be able to make monthly mortgage payments.
Make it measurable – Like your emergency fund savings resolution, you’ll want to make sure your home savings resolution is quantifiable. Create an additional savings goal and budget category for the money you’ll be stashing away – an actual dollar amount – and make sure your savings account reflects the goal.
Plan reasonably – Unless you’re counting the players on the pitch for the France and Argentina World Cup Final, very few people can afford to buy a house outright. It’s a huge expense. Manage your expectations, keep your budgeting goals on track, and remain optimistic.
Set up your environment – Similar to your emergency savings resolution, you’ll want to create shortcuts to save. Automated savings, savings goal trackers, additional high-yield savings accounts, and finance apps are your friends in this instance. Stick to it and watch your downpayment grow!
Resolution 6: I will add a new income stream
It’s 2023 and the gig economy is thriving. If you want to burn your Dockers and Banana Republic blazer once and for all and start driving an Uber full-time, you can! If you want to pad your income and work a few extra hours a week, that’s totally doable, as well.
Ready to earn more and boost your net worth? Get started with these four steps:
Be specific – You need to decide what you’re going to do, so play to your skillset. Are you a painter? Commission murals around town. A writer? Upwork has plenty of contract work. Amateur go-kart racer? Uber and Lyft have plenty of users in need of a ride. (Please obey all traffic regulations.)
Make it measurable – The more you work, the more you make – right? You can measure your income by tracking your side gig earnings and watching them side-by-side against your expenses to understand your profits.
Plan reasonably – Ambition, again, can be a blessing or a curse. If you’re too burned out from driving Uber at 4am to make it through your 1pm call with a client, you’re doing too much! You need to make sure your side gig is sustainable and fits into your life.
Set up your environment – Your environment in this case is a bit more abstract than our previous resolutions – the goal is to make sure you’re in a place where you’re feeling energized and able to work. This means not only taking care of your tools (your car for ridesharing, your computer for graphic design gigs, etc.), but also taking care of yourself. Eat right, exercise, get enough sleep, and be mindful of your stress levels.
Resolution 7: I will start thinking about retirement
Life moves fast! Time always seems to have a way of getting away from us before we even realize it – the future approaches with each passing minute and we get closer and closer to retiring. So, why the introspection about time? Because if you fail to save for retirement, you can find yourself at 70 years old without the ability to stop working.
Not sure where to start your retirement savings? We’ve got your back:
Be specific – You’ll need to start by setting your goals for your retirement savings – a retirement calculator is a great tool to start with. Most Social Security benefits won’t kick in until you’re nearly 70 years old, so you’ll need to make sure you have something to subsist on. Talk to HR to figure out your 401(k) or pension plan, as well.
Make it measurable – This is more of a long-term method, but you’ll want to track your retirement account(s) and check in on them regularly to watch them grow, monitor their progress, and eventually add more to your 401(k), IRA, or pension plan.
Plan reasonably – It’s really important, again, to make sure your plan is sustainable – don’t max out your contribution and live on a shoestring budget that brings unnecessary stress. If needed, you can try a few ways to make more money to add to your retirement fund.
Set up your environment – Facilitate your investment by setting up automatic contributions from your salary – many employers will even match your 401(k) contributions! You can track your retirement and investment accounts together in apps like Quicken or Simplifi.
I will stick to my financial resolutions
Simply put, sticking to a New Year’s resolution is hard work – there aren’t any shortcuts, only ways to ensure your own accountability. Whether you want to lose weight, learn a new language, go bungee jumping, or take control of your finances, you are ultimately responsible for your success.
When it comes to finances, the process is deeply personal – the right goal for you depends on your specific financial situation. There’s no one-size-fits-all solution. But with the steps above, you can commit your financial plan to habit, pay off your debts, increase your savings, and prepare for a financially-responsible future.
Now is a great time to get your financial house in order, and these financial resolutions are a great jumpstart. If you need tax assistance – or any kind of tax resolution help, don’t hesitate to reach out to me or any of my Tax Problem Solver Team, and we can dive into whatever’s going on.
Contact me by one of the methods below in the blue box, or email me at Larry@TaxProblemSolver.com and we can review your specific issues and solve them. You can also click here to book a free consultation.
