New Year’s Money Resolution
What will be your New Year’s money resolution? Save money? Invest? Retire? Pay off debt? Whatever it may be, might I suggest starting out small. Why small? University of Michigan psychologist Karl Weick argues that large problems are best broken down into smaller ones with concrete achievable goals.
I agree because that feeling of “winning” and achieving something, even if it’s small, enhances our motivation towards the bigger picture. In this case, money stability and freedom. Regardless of what money resolution you commit to, the goal is to improve your life in the coming year.
Below are New Year’s Money Resolutions that are small with concrete achievable goals.
Pay Off Debt
Make it a goal to pay off debt this coming year. Use the Snowball Method to pay off smaller to larger debts. Or, the Avalanche Method to pay off debts from the highest interest rates to the lowest. Both are the most popular strategies for paying off debts fast and effectively.
The relief from getting out of debt or reducing it has a profound effect on your mental well-being. Focus on your debt(s) this year!
A New Year’s money resolution could be saving money. But how much? Again, start small. It could be $10-$100 each week or month. You decide, but deposit it in a separate account. Having the money in a separate account makes it easier to ignore. Out of sight, out of mind.
Decide how much you want to save and divide the amount in increments throughout the year. Make it simple by using automation to auto-deposit the amount into your separate savings account on payday.
Make it a priority to start investing or contributing more. This could be contributing to your company’s 401(k) or opening a Roth IRA. Either way, the magic of compounding makes investing something you SHOULD be doing every year, no matter how small. My goal every January is to max out my Roth IRA for the year to take full advantage of compounding.
Make sure to review the 2020 guidelines to plan out your contributions. If you’re not sure how to invest, read my guide here. There are plenty of investing apps that make it easy and free to start. Again, it doesn’t matter how much you invest – but make it a goal to start this year.
Build your Emergency Fund
Oh, gosh – when it rains, it pours. The car breaks down? Gas heater breaks? Roof leaks? One New Year’s money resolution could be starting or increasing your raining day fund. An emergency fund is vital when stuff goes wrong and is designed to cover a financial shortfall when unexpected expenses crop up.
Instead of waiting for something to happen, be proactive and put money aside. An emergency fund is one of the few times that planning for “what ifs” is important.
Create a Financial Plan
Ok, you have a budget, you save money, and you invest – but why? If you’re not sure why are you doing what you’re doing with your money then you need a plan. A financial plan to be exact. This year make it a goal to face your finances and align your financial goals with your personal ones.
Make it a habit this year to review your money goals monthly. That way you can adjust your goals and plan for future events.
Learn about Money
Maybe this year you just want to learn more about money. Luckily, if you’re reading this then you found my fantastic blog. This blog is just one vessel of knowledge and there are additional resources that explore money topics. Here are a few:
Whatever New Year’s Money Resolution you make, write it down and hold yourself accountable. If you’re a workout nut like me, the gym is packed out after New Years but by March, only a handful remain. Why? It’s easy to declare a resolution but harder to follow through. Don’t be that person this year. Hold yourself accountable or have someone do it for you.
Remember, start small. Good luck!