If you’re like most people, you’re probably reeling from everything you spent during the holiday shopping season. And you may be considering making some money resolutions for 2022. But why wait for 2022 to get started on your money goals? This guide will help you get a headstart on five top money resolutions so you can start achieving your goals today.
Starting strong on 5 New Year’s financial resolutions
Studies show that 80% of people drop their resolutions by February, and only 8% of people actually achieve their goals. That’s not a very high success rate, but setting the right strategy from the start can help improve your chances. With that in mind, we offer three steps that can give you a head start on the top five money resolutions that people make.
Resolution #1: Pay off debt
If you’re a Consolidated Credit client, you have a jump on this goal because you already have a plan in place to pay down credit card debt. You can skip straight to Step 2.
For everyone else, these three steps will help you get started on paying down debt in 2021.
Credit card debt is often the biggest source of financial stress and budget challenges for most Americans. So, it’s important to get a clear understanding of how much of this high-interest rate debt that you have.
Consolidated Credit has a handy credit card debt worksheet that can help. Use this to list the balance, monthly payment, APR and account status for each credit card balance you have. This will help you prioritize your accounts for a debt reduction plan.
In most cases, a good debt reduction strategy will focus on credit card debt first. However, you also want to know how much installment debt you have and what interest rates each loan carries.
You can use Consolidated Credit’s free borrowing worksheet to get any easy summary of your loans. You will list the current balance, APR, monthly payments, and the number of payments left. This will help you assess which loans could potentially be paid off this year. If you have student loans, these are usually the debts you want to focus on once you have your credit card debt under control.
You should also explore solutions that can help you pay off debt faster than traditional monthly payments can. For example, if you don’t have a plan for your credit card debt, call (844) 276-1544 to get free credit counseling. If you have student loans, explore options for debt consolidation.
Talk to a certified credit counselor to customize a strategy to pay off your debt.
Resolution #2: Save money
Everyone wants to save more, but increasing savings isn’t always easy. If you just commit to saving whatever you have left at the end of the month, you won’t save anything at all. Instead, you need to make savings SMART.
Setting a realistic amount you want to save within a set time limit gives you a specific goal. Then you can start mapping out how to achieve that goal by dividing the amount you want to have saved by the number of months you set to get there.
Finding ways to reduce costs in your budget will increase your cash flow, giving you more money to save. Once you’ve evaluated your budget, make savings a line item in your budget. Savings should be like a bill you pay yourself. It’s a necessity!
Making savings automatic ensures that you can save money quickly.
- Set up a recurring monthly transfer from your checking account to savings.
- You can also ask your HR department to split your direct deposit to send some of your paycheck directly to savings.
- Also, check the APY (annual percentage yield), which is the interest rate on your savings account, if it is less than 1%, it’s time look for a better savings account.
Resolution #3: Improve your credit
A better credit score can increase your purchasing power and help you enjoy interest rates and better terms on credit. Don’t pay for expensive paid credit monitoring or credit repair services! You can fix your credit yourself for free.
You have three reports (one from each credit bureau). You can download all these reports for free through annualcreditreport.com. If you haven’t reviewed your reports recently, get all three and review them carefully.
You want to look for errors, such as duplicate accounts, collections that aren’t yours, outdated account statuses, and missed payments that you made on time.
Correcting reporting errors will clean up your credit profile, and it’s a consumer right protected by federal law. You can dispute mistakes directly with a creditor or with the credit bureau that issued the report. Use our free guide to repairing your credit for more information.
Instead of paying for credit monitoring, get it for free. Many financial institutions and credit card companies now offer free credit score tracking, so check to see if it comes with any of your accounts. Or you can get a free credit monitoring tool, such as Credit Karma or Credit Sesame.
Resolution #4: Start saving for retirement
More and more employers offer retirement savings tools like a 401(k).
If you aren’t enrolled already, talk to your HR department, and get enrolled as soon as possible. Ask them if the company provides “matching,” where the company offers to match the contributions you make. For example, a common match structure is that your company will contribute 50 cents for every dollar you contribute, up to 6 percent of your annual salary.
If you are enrolled in your company’s plan, review how much you’re contributing. Make sure you’re contributing at least up to the match limit, and see if you can contribute more.
Next, you’ll want to talk to your 401(k) plan advisor. If you don’t have their contact information, you can get it from your HR department.
Set up an appointment and review the allocations you have, which invest the money you save. Make sure your allocations are optimized for today’s economy and work with the plan advisor to make adjustments where needed.
IRAs offer unique benefits versus a 401(k). For instance, a Roth IRA offers tax-free withdrawals when you retire.
So, consider diversifying your retirement savings. Find a fiduciary financial advisor who can help you set up an IRA and then set up automatic payments to pay into that account every month.
Resolution #5: Buy a home
Buying a home is an exciting step in your financial life. Good planning and preparation can make the homebuying and mortgage approval processes easier.
A good credit score makes it easier to qualify for a mortgage and helps you secure the lowest interest rate possible. Download your credit report for free through annualcreditreport.com. If you find mistakes, go through the credit repair process to fix them.
A housing counselor will help you evaluate your finances and create a customized action plan to ensure you are mortgage-ready. They will help you discover how much home you can afford so you can narrow your search and shop for the right home.
This 8-hour course goes in-depth on how the homebuying process works and what homebuyers need to know to be successful. Upon completing the course, attendees receive a certificate that’s good for one year. This certificate is required to qualify for many, valuable down payment and closing cost assistance programs.
If you are ready to connect with a HUD-certified housing counselor, call 1-800-435-2261.