- Beth Ann Tabak
How to achieve your New Year’s financial goals
The New Year is always a great time to review and revamp your finances for a successful financial future. Here are a few ways that you can get started on achieving your financial goals.
Create a budget
If you’ve read Financial Fundamentals before, you’ve probably noticed a pattern: it all starts with a budget.
A budget is a great first step in moving down the road to financial success. It lets you plot out all of your income, all of your expenses, and anything that you have left over to put toward debt repayment, reaching your savings goals, or just some fun. Don’t know where to start? KOFE, a partner of 7 17 Credit Union in providing free financial education to its Members, offers some great tools to help you build your budget.
Get out of debt
The American Psychological Association states that money is the number two stressor in America, only recently falling from its 10-year reign as number one. No doubt that concern over debt makes up a good chunk of that stress. When you reduce your debt, you’re not only easing your stress, you’re clearing your way to a stronger financial future by improving your credit score and thereby increasing your chances for a better loan rate when purchasing a house or car; increasing your financial security by having more money to put in the bank; cutting back on the number of bills you have to track each month, and more.
To get out of debt, you have to create a solid debt repayment plan; there are a few methods you can choose from, including the avalanche method, where you pay off your debt with the highest interest rates first; the snowball method, where you pay off your smallest debt first; and debt consolidation, where you roll all of your debt payments into one payment with a lower interest rate. If you feel you need guidance in creating your plan, consider working with a qualified financial coach. KOFE offers 7 17 Members free access to qualified financial coaches, who can help you get started.
It might seem difficult at first, especially if you’re working on a shoestring budget, but socking away your extra income now will pay off in the long run. Some suggest saving 10 percent of your monthly income, while others suggest 20 percent. It really boils down to what you can afford to save while still covering your monthly bills. Even if you just put five percent aside each month, it’s something, and once you pay off your debts, you can re-evaluate your budget to start saving more.
If you’re searching for ways to save more money now, consider cutting back on discretionary expenses like dining out or your weekly manicure. You can even save money on groceries by creating a meal plan for the week, and only purchasing the items needed to make those meals.
You can make saving easy by setting up an automatic savings transfers each month. By scheduling your money to automatically transfer from checking to savings or a money market account, you can build your savings rapidly without even having to think about it. Then, when that dream vacation or unexpected car repair comes up, you don’t have to scramble to find the funds to support it.
Finally, when it comes to saving money, don’t forget about funds for a happy retirement. The average age of retirement in America is 65, but with life expectancy being much longer, you want to make sure you have the funds in place to live the same lifestyle you did before you retired. Consider using a retirement savings calculator to see how much you should be saving. Investigate retirement options, such as an IRA, and make sure that if your employer offers a 401K match that you are taking advantage of it.