It’s not just a new year, but a new decade. And what better time for fresh starts, goal-setting and financial resolutions?
Maybe you’ve already set some New Year's resolutions for yourself — read more, go to the gym more, start volunteering. But have you made any financial resolutions? In 2019, only 29 percent of Americans reported feeling “financially strong,” according to a personal finance study by Financial Health Network. Most reported that they were struggling or vulnerable financially.
If you’re ready to set financial resolutions, be specific about your goals. Rather than resolving to “save money,” specify what steps you’re going to take. By setting smart financial resolutions, 2020 can be the year that you take control of your finances and better prepare for your future.
Need some ideas? Here are 5 financial resolutions for 2020.
1. Create A Budget You Can Stick To
Most people recognize that budgeting is a good idea, but sometimes it’s hard to follow through. If you’ve had trouble sticking to a budget in the past, it might be time for a new approach.
Take a look at your bank and credit card statements over the past few months. Make notes of what you find. You might learn a lot about yourself when you really evaluate your spending habits. Let this information guide you as you determine a future spending plan.
Consider enlisting the help of a comprehensive cash-management site such as Mint, or even give yourself a weekly or monthly allowance. Remember to factor in entertainment or small rewards as well as your standard living expenses. While creating a budget you can stick to may require some trial-and-error, it’s a worthwhile goal that can have a positive impact on your spending and saving habits.
2. Automate Your Savings
Depending on your job, your retirement savings may be automatically deducted from your paycheck. Wouldn’t it be nice if you could do something similar to set money aside for your savings account?
Turns out…you can. With Academy Bank’s Saving Cents feature, your purchases will be automatically rounded up to the nearest amount of your choosing. The extra dollars or cents saved are added to your savings. Out of sight, out of mind.
Here’s how it works:
- Choose - Choose how much you'd like to round up your debit card purchases from your checking account. Options range from the nearest $1 to $5 increment.
- Save - Every time you make a purchase, we’ll round it up. Each night all the extra change is transferred automatically from your checking account to your savings account.
- Track - We keep track of Saving Cents transfers and place that information right on your bank statement each month.
3. Start an Emergency Fund
Only 28% of Americans have emergency funds, according to a Bankrate study on financial security. And another report by the Federal Reserve found that nearly 40% of people wouldn’t be able to come up with $400 for an emergency.
We like to call these “peace of mind” accounts. Why?
If you don’t currently have money set aside in case of emergency, building your emergency fund is a smart financial goal for 2020. This fund can help provide a cushion during life’s more unexpected moments. This could help with anything from a change in employment, to a fender bender, to a medical bill. Your emergency fund can help ensure that your emergency doesn’t provide additional stress (or peace of mind) from a financial perspective.
Even starting small with your amount of savings can help a lot. So don’t worry if your contributions are small to start. Even having an emergency fund with $250 can help prevent your family from falling on hard times, so make 2020 the year you prioritize saving.
4. Manage Debts
Many Americans have debt of some sort, and managing it effectively is a smart goal for the new year. Whether it’s credit card debt or student loans, unmanaged debt can lead to financial stress and higher interest rates — which can add up over time.
Taking inventory of your debts to understand exactly how much you owe, and the associated interest rates, is a good place to start. Then, it’s time to choose a debt payment approach. It’s January, so hopefully you like winter-themed metaphors.
Investopedia describes the two main strategies: the snowball method and the avalanche method. With the snowball method, you pay off your smallest debts first to help build your motivation through the debt payment process. In contrast, using the avalanche method, you pay your debt with the highest interest rate first.
5. Keep an Eye On Your Credit Score
Establishing and maintaining a good credit score may take a bit of work, but the benefits are enormous when it comes to achieving your financial goals. Not only does your credit score affect the credit cards you can apply for, but it determines your access to loans and other financial services. It can even have an impact on your insurance policy prices.
You can request a copy of your credit report from AnnualCreditReport.com three times annually — once from each of the three main credit reporting bureaus. Being proactive when it comes to monitoring your credit score can ensure that you’re one step ahead.
Making bill or credit card payments on time — and in full, as often as you can — can go a long way when it comes to improving your credit score. Many service providers offer the option to autopay, decreasing the likelihood of missed payments and higher interest rates. Lowering your debts and taking care not to apply for new credit cards too often can also help your credit score improve.
Financial Resolutions for Financial Health
When making your financial resolutions for the new year, remember your reasons for setting these goals in the first place. Make the most of your financial resources and focus on the future you’re envisioning for yourself. May 2020 be your most financially healthy year yet.