Most of us like to make resolutions for the New Year, it seems to have become tradition. The most popular revolves around exercise or improving our fitness. Sports centers are the greatest beneficiary of this goal, as they see an influx of new memberships in January. Do we actually review previous years’ resolutions to see how we did? And how many of us include financial goals on our list of New Year’s resolutions?
Actually, more important than all of the typical resolutions we make are the ones that bring us closer to financial freedom. According to a survey by Fidelity Investments, at least 80% of those who set financial goals in 2016, met them, reducing their debt and entering into a world free of financial stress. Especially on the heels of holiday spending, taking time in these final days of the year to assess your 2016 financial performance and to prepare for 2017 is the best gift you can give to yourself.
- Assess. Before you can begin to develop financial goals for 2017, you first need an accurate picture of your current financial health. Pull together all of your financial information and assess: What was your income? What were your expenses? How much are you carrying in debt? (be sure to include everything) How much do you have in savings? This is also a good time to clean up your financial records. There are many software programs and apps that help you to track your income, expenses, savings accounts and debts.
- Budget. We have spoken about this topic in previous posts. Budgeting is extremely important. Without it you do not have a blueprint of your financial health, making it impossible to set measurable financial goals. First of all, pull out last year’s budget. How did you do? Make note of the categories where you spent more than budgeted. What increases or decreases in income do you anticipate in the coming year? Calculate all of your monthly living expenses, including utilities, groceries and housing and factor all of this into your 2017 budget.
- Pay off your debt. Pay off your debt. Debt is the biggest killer of your financial freedom. A key cornerstone of your 2017 financial goals is a debt reduction strategy. Total up all of your debt—credit cards, student loans, mortgage, automobile and other consumer loans. How did you do with the debt reduction goals you set for 2016? If you fell short, why? Develop an action plan to help you stay on track with reducing your debt in 2017. If you need help, consider a debt consolidation loan through a marketplace lender, such as Peerform, or get in touch with your lenders and see if you can renegotiate the terms.
- Improve your credit score. Check your credit score and determine if there are any errors on the report. Next, set goals for how you can improve your credit score. Having good credit means better loan terms for when you need something, such as to buy a house or automobile. There are a couple of digital sites that help you stay in touch with your credit score and also give you some tips on how you can raise your score. Check out Credit Sesame and Credit Karma.
- Set up an emergency fund. It is impossible to foresee the future. We simply never know when something unexpected is going to come along and totally disrupt our best laid financial plans. An unforeseen financial emergency can completely destabilize your financial health. An emergency fund also frees you from the paycheck-to-paycheck mentality, which causes stress and exposes you to financial risk.
- Are you saving for retirement? How did your retirement accounts perform in 2016? Did you max out on all of your retirement accounts, especially your employer-sponsored 401(k)? What more could you have invested into your retirement savings? Make 2017 the year that you take full advantage of all your retirement savings options.