How to Actually Keep Your Financial New Year's Resolutions
How many times have you set a New Year’s resolution and failed to keep it? You’re not the only one. In fact, for the average American, it takes just 32 days to give up a resolution.
But hey, it’s the thought that counts, right? Think again.
It’s possible to ensure success with your resolutions – it just takes consistency. And if you’re like the 51% of Americans that are setting financial goals, we’ve got the tips and tools you need to see your resolution make the 32-day mark.
Resolution: Get Rid of Debt
As of late 2021, the average debt among American consumers sits at a whopping $92,727. It’s time to rethink how we handle our debt – most notably our credit card balance.
Two popular strategies for paying off credit card debt are the avalanche and snowball methods. The avalanche method is exactly as it sounds: pay off the card with the highest interest rate first. Meanwhile, the snowball method grows bigger over time: begin by paying off your smallest debt first and build momentum with each retired debt.
If those don’t work for you, try a personal loan. High interest rates on credit card balances can take a toll over time, and consolidating your debt into one monthly payment could save you money in the long run. A personal loan could help you secure a lower interest rate, a lower payment, and have the convenience of one payment. Since personal loans have set terms, you also know the exact date your debt will be paid off. Retire your debt sooner, and your credit card will thank you.
Resolution: Budget Better
We hear you on that one. Coming off the holiday season, most people’s bank accounts are feeling the strain. We’ve got a few tricks up our sleeve, though, for staying on top of finances.
If you’re looking for a better way to keep track of your finances, try an account aggregator. An aggregator lets you link your accounts for a holistic view of your funds, which means you can make smarter money decisions. Some free account aggregators will sell your financial data, but at Axos, our Personal Finance Manager keeps your data private. Our tool also auto-categorizes your transactions to reveal your spending habits (you might be treating yourself to that second coffee more often than you realize). Once you understand where your money is going, you can watch out for your triggers. Remember, little purchases add up to big expenses over time.
Skipping a $5 latte once a week? That’s around $260 saved per year.
Budgeting for a big purchase? Map out how much you need to save each month. Then, set up an auto deposit into a separate account to hold your funds. Bonus points if it’s interest-bearing. Not only do you not have to remember to transfer money every month – you also will be earning in your sleep. Most productive sleep ever!
Another important aspect is mindset. People often mistake budgeting for limiting. Shift your perspective, and you’ll realize that making your dinner at home, rather than ordering delivery, is not a limitation. It’s just smarter financing.
Resolution: Increase Savings
The past couple of years have shown us the importance of having an emergency fund, and Americans are taking that hard-learned lesson into consideration. Indeed, WalletHub reported the top financial resolution for Americans in 2022 is to save more. Here’s the million-dollar question, though: how?
First, you’ll want a savings account that earns you high interest. Don’t let your money sit in an account that only generates $0.50 a year; your money will quickly lose value as inflation rises. Here are three kinds of accounts you’ll want to take a look at:
High Yield Savings
Build up your savings over time with a high interest rate.
High Yield Money Market
Like traditional savings, you get higher interest, but you can withdraw a few times a month if you need to.
Certificates of Deposit
If you like high returns with no risk, this kind of account allows you to lock away your money and earn high interest for a period of time.
Next step: calculate just how much you can put aside each month into your savings. You should have at least 6-12 months’ worth of expenses in your emergency fund. Build it up over time, though – your goals must be attainable or else you’ll find yourself quickly breaking that well-intended resolution.
The easy way to make sure you always get the money in your savings account, rather than accidentally spending it, is automation. Set up auto transfers every paycheck. Trust us, it’ll be one of the smartest things you ever do.
“When it comes to financial resolutions, try to use set-it-and-forget-it strategies so you never have to think about it again. Automation is your friend.”
Andrew Latham, Managing Editor at SuperMoney
Our biggest tip? Incrementally increase the amount you’re contributing over time. This will help you to build up a nest egg that you can rely on years down the road.
It’s All About Mindset
What resolutions really come down to is your mindset. Set yourself reasonable, attainable goals, and acknowledge that you may stumble along the way (because hey, nobody’s perfect). The hardest part of it all is committing to a goal and staying consistent – but if you’re struggling, try this strategy:
“I have seen phenomenal success when people don’t think of their new goal as a resolution but as a new routine.”
Joe Daigle, Chief Investment Officer at Mallard Financial Partners
With a little time and effort, your new financial routines will become as natural as brushing your teeth every day. Good luck!