4 financial resolutions to make for this year
Now you may have certain goals for this year -- exercise more, eat healthier and spend less time wasting away on social media. But it's also a good idea to establish some financial goals. Here are four worth aiming for.
1. Build an emergency fund
An emergency fund could be the one thing that bails you out when unplanned bills strike or your income takes a hit. Ideally, you should have enough money in your savings account to cover three to six months of essential living costs. You can use an emergency fund calculator to figure out how much money you should be aiming to have socked away.
If you don't have a complete emergency fund, building one should be your top priority for this year. If you have savings but think you could use extra protection, then boosting your emergency fund -- say, from three months' worth of living costs to five months' worth -- is another great goal to aim for.
2. Pay off high interest debt
It's one thing to carry a mortgage or owe money in the form of an auto loan. But it's another thing to have a nagging credit card balance. And if you're in the latter boat, it pays to put paying off that debt as a top resolution on your list.
The problem with credit cards is that they charge a lot of interest whenever you fail to pay your balance in full. Then, the longer you carry your balance forward, the more interest you accrue. Knocking out that debt should sit high on your list of priorities, mostly because it could save you a lot of money in the long run. Plus, paying off credit card debt could actually help your credit score improve.
If you owe money on various credit cards, it could pay to consolidate that debt via a balance transfer -- especially if you qualify for an offer with a 0% introductory rate. Otherwise, your goal should be to pay off your credit cards in the order of highest interest rate card to lowest interest rate card.
3. Save for retirement
Your retirement isn't going to pay for itself. You may be entitled to some money from Social Security, but those benefits aren't enough to sustain most seniors in the absence of additional income.
That's why building your own nest egg is a good bet, and the sooner you get started, the more time you'll give your money to grow. If your employer offers a workplace retirement plan, you can sign up to participate in that plan and have money deducted from your paychecks. Otherwise, you can open an IRA and save there.
4. Stick to a budget
Setting up a budget -- and following it -- may not be the most exciting thing you do this year. But it's an essential step on the road to managing your money.
Without a budget, you might lose track of how much you're spending on different expenses. And that could make it difficult to meet other goals, like saving for emergencies or paying down debt.
Rather than wing it on the spending front, take some time to set a budget. Create a spreadsheet of your different expenses or find a user-friendly budgeting app that will help you identify your various expense categories and link your credit card charges and checking account withdrawals to those categories.
Many people are excited to ring in the new year. If you're hoping to work on improving your financial picture, these resolutions are worth making. Think about your needs and map out goals that are important to you. It may be the case that you don't have unhealthy debt and have plenty of savings, but that you're hoping to start a business or buy a home. Set your own priorities, so you know what to focus on this year.
This information is provided for educational purposes only; it is not intended to provide tax or investment advice. All investments are subject to risk. Neither Voya® nor its affiliated companies or representatives provide tax or legal advice. Please consult a tax adviser or attorney before making a tax-related investment/insurance decision.