Contrary to popular belief, physical health and well-being aren’t the only resolutions to make this time of year. The end of the year is also an excellent time to make New Year financial resolutions. Consider these three strategies to make smart money decisions for the year ahead.
Make a plan to spend less than you earn
Easier said than done, right? It sounds obvious, but many people struggle to live within their means because they don’t have a clear budget. And before you know it, you spend all your money on non-essential items. When overspending becomes a habit, it’s challenging to reach bigger goals, like buying a house, investing in grad school, or saving for retirement.
Luckily, there’s a simple solution. Estimate how much money you plan to make next year. Then, create a budget following the 50/30/20 rule. For example, if you expect to take home $4,000 a month after taxes, you should allot $2,000 (50%) to essential living expenses or “needs,” $1,200 (30%) to the non-essentials or “wants,” and $800 (20%) to savings. If you regularly spend 100% of your income on the “needs” and “wants,” you’ll find yourself in a sticky financial situation down the road.
Create an emergency fund
It’s true: many things in life are beyond your control, especially these days. But a simple way to relieve stress is to create an emergency or “rainy day” fund. And one of the easiest ways to do this by setting up automatic transfers. With a DEXSTA checking account, you can set up automatic monthly transfers to your savings account. Putting that 20% straight into savings is an excellent way to build your emergency fund. Before you even have a chance to miss the money, you’ll have healthy savings for the following year. The reward is worth the effort.
Set SMART money goals
Once you have an idea of your goals, apply the SMART method. SMART is an acronym used to set practical and achievable goals. It can easily be applied to any goals, including financial ones. As such, you want your New Year financial resolutions to be:
- Specific: Clearly define your goals.
- Measurable: Be able to track your progress.
- Achievable: Make sure your goals are, in fact, attainable.
- Realistic: Financial goals should be realistic in terms of your lifestyle and obligations.
- Time-based: Set a deadline, so you have something to work toward.
For example, try reframing “I’m going to save more money this year” to “I’m going to add $5,000 to my savings account by June 30, 2021.” The latter goal has a specific, achievable, and realistic amount with a set date that you track toward. Having smaller goals with specific timelines can cut the overwhelm and help you stay on track.
Need help getting started?
Setting New Year financial resolutions only works if you follow through. But if you do, these resolutions can be a great jumpstart to creating healthy money habits in the year ahead—and beyond. At DEXSTA, we want to see you succeed. Whether you need a personal loan to achieve a big financial goal or a savings account to track your finances, we’re here to help.