Invest Financial Planning

How to Set Financial Resolutions, Based On Your Goals

Lindsay Tigar  |  December 27, 2019

January 1 is both a beacon and a motivator to tackle those big money goals. Here’s how to get started on the right foot and see it through to success.

With the arrival of 2020 it’s natural (and, well, fun!) to imagine what could be in store for us. There are 12 shiny, bright months ahead that hold promise, possibility and purpose. How can we make the most of every single one of them? By creating impactful, manageable and effective financial resolutions that serve our goals. 

With a few changes, some planning and hard work, 2020 can be the year you take real action to achieve your greatest aspirations. We’ll help you get started by walking you through those important first steps of achieving your financial resolutions by the end of the year. 

Pad your emergency savings and retirement accounts. 

Unexpected expenses, a month full of birthdays or an impromptu trip can all throw off our plans to finally amass an emergency fund or start saving for retirement in earnest. If this is the year you truly want to add more bulk to these all-too-important accounts, make it happen by setting up automatic deposits to funnel money from each paycheck into these accounts. 

Sort of like a tree falling in a forest, when we don’t see the cash, we don’t miss it. “You’ll be able to put money away without putting too much thought into doing it regularly, and then as more money becomes available in your budget, you can increase your contributions,” says credit industry analyst, Nathan Grant

Grant recommends setting a specific goal, like saving three months worth of living expenses to cover housing, food, transportation, and, if we have them, at least the minimum payments on recurring debts just in case there’s trouble with your income. For retirement, set either a dollar goal or pick a percentage of your income (15% is ideal, but anything that gets you started is a worthy goal).

MAKE IT HAPPEN IN 2020: Our guide to emergency funds will help you make quick work of this important money goal. 

Buying a home 

Part of the good ‘ole American dream for many is becoming a homeowner, and it’s a major moment in many of our lives (including HerMoney’s Editor-In-Chief, Kathryn Tuggle).  It takes a lot of savings and even more self-control to sign on the dotted line of a mortgage. If 2020 is the year when this goal will be within reach, it’s time to make yourself a strong candidate for a mortgage, especially if you live in a zip code that’s not a buyer’s market. 

Financial expert and CEO of Coastal Wealth, Jeremy Straub suggests starting by improving our credit score in the first quarter. “This number usually determines if you can receive a mortgage and what your interest rates would be,” he says. “You can clean up your credit by paying off credit card debt or other miscellaneous unpaid debt that you have acquired. Your lender will also look at your debt-to-income ratio to ensure you can afford to make your monthly payment.”

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While working on putting the finishing additions to your down payment fund and polishing your credit record, take the time to research dutifully. As Ashley Russo, a financial advisor for Northwestern Mutual recommends, it’s beneficial to spend twenty minutes every day to understand what’s realistic to spend on a house within your budget in your geographic area. From here, you’ll have a clearer picture of homeownership goals, making your resolution that much stronger.

MAKE IT HAPPEN IN 2020: How Do You Buy a Home?

Pay down credit card debt

For many people, debt starts as an anthill and quickly becomes a mountain. The longer we leave a balance lingering, the higher the peak will reach. But there are ways to create an achievable resolution for what feels like an impossible task.

The first step is being honest and open about our overall debt situation, and reading the fine print on what debts are costing us the most. In other words, Grant recommends the debt avalanche payoff method which starts by tackling the high-interest debts head-on. “You should make at least the minimum payment on every debt you owe, while putting any additional money in your budget towards the debt with the highest interest rate until it’s paid in full,” he explains. “Once that debt is paid off completely, apply the extra money that went toward it to the next highest interest debt, then rinse and repeat until you’ve paid off all of your debts.”

Another tactic to help you reach debt-free status — and a smart way to begin 2020 — is to transfer balances to a credit card with a 0% introductory APR. “Some cards can have an interest-free period for 18 months, so see if this can help resolve some of the debt headaches of years past,” Grant says. “As you pay your debt back responsibly, you should see your credit scores increase, which can help with other major financial milestones that could await you in the new year ahead.”

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MAKE IT HAPPEN IN 2020: How to Pay Off Credit Card Debt and Is Debt Consolidation Right for You?

Make a dent in student loan debt

Student loans can make it hard to come up for air. For folks with $100,000 or more in university debts, payments can be upward of $1,000 a month. And much of that payment just goes toward covering interest. 

More than any other financial goal, putting a mega dent in this expense paves the way for a more lucrative future, says Northwestern Mutual’s Russo. The first step you should take is to negotiate for a better rate. “If you have several loans, gather every single interest rate. Next, call student loan refinancing companies or credit unions to see what type of loans they are offering,” she says. “Getting a lower interest rate will allow you to pay more toward principal and pay your student loans down quicker.”

MAKE IT HAPPEN In 2020: 4 Tools for Managing Your Student Loans

Pay cash for that nice vacation

The ability (the luxury, even) to spend money guilt-free is part of why we work so diligently to save. Since the vast majority of people don’t have an unlimited budget to spend on travel, building up an R&R fund requires coming up with a savings strategy like any other financial goal. 

Russo recommends approaching this goal like you do other must-pay expenses (e.g. your cable bill or mortgage payment). “You would likely never miss your cell phone bill, so don’t miss your ‘self-bill’,” she says. “If you want to save, say, $6,000 over a year, pay yourself $500 a month. This might require shifts within your budget, but if this is your priority, don’t allow this bill to be late.”

Making conscious tradeoffs in your everyday spending will help make these temporary budget cuts more palatable, says Straub, from Coastal Wealth. “You might need to forgo your expensive weekly steak and wine dinner out to save the funds for that trip. You can also start cutting other unnecessary weekly expenses to save as well,” he explains. “It comes down to the cost versus benefit of when and how you want to spend your discretionary income.” So instead of buying a new pair of jeans, earmark that money for a round of drinks in Mexico.

MAKE IT HAPPEN IN 2020: How Six Women Met Their Elusive Savings Goals

Think progress, not perfection

If you miss a step on the ladder to achieving your 2020 financial resolutions, resist giving yourself a hard time. Remember, managing finances is a skill few have until they start doing it. “The truth is, most of us have not been taught, even with years of schooling under our belts,” Russo says. “Be kinder to yourself about what you don’t know and find the resources to help educate you.” The right approach to your resolutions will help you stay strong all year long.

WE’LL HELP YOU MAKE IT HAPPEN IN 2020: Subscribe to HerMoney today (it’s free!) for weekly tips on earning, saving, borrowing, investing, and protecting your money.

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