I’m a fan of New Year’s resolutions - and setting goals in general - because I find that they help me to focus on the things that are most important and they help me to live more intentionally.
In order to help others steward their resources in a more meaningful way, I’ve put together a list of 10 potential New Year’s resolutions that will help you to improve your financial situation. I’ll share five today and then five more next week.
Whether you are someone who loves New Year’s resolutions or despises them, I hope that you find value in at least a few of these.
1. Set Up and Follow a Budget
For many, “budget” is a dirty word. Budgets are often viewed as constricting and time intensive when actually they can be quite freeing. Free online tools like Mint.com can make it very easy to manage spending. I believe that understanding and making smart decisions about cash flow is extremely important and is the foundation of a financial plan. Having a cash flow plan or budget can help you to better identify your values, prioritize and achieve your financial goals, and build wealth - so what are you waiting for?!
2. Build an Emergency Fund
Having three to six months of living expenses saved in a bank account is an essential part of a financial plan. You won’t earn much interest on this account, but rather than thinking of it as an investment, think of it as insurance. Should you ever lose your job, incur expensive medical bills, or have unexpected home or vehicle repairs, you will be thankful that you have these funds set aside. It will keep you out of debt.
3. Develop a Plan to Pay Down Debt
At times, debt can be overwhelming and feel a little bit like quicksand. Although you can’t change decisions that you’ve made in the past, you can make changes today that will influence your future. Regardless of your amount of debt, it is important to have a plan in place as to how you will pay it off. The order and amount in which it is paid off depends on your individual situation. However, in general, pay off any high interest rate debt first. And depending on your tax bracket you may choose to make tax deductible loans like mortgages and student loans a lower priority.
4. Make Sure That You Are Properly Insured
I'll admit, insurance is not nearly as exciting as saving, spending, investing, or giving - however, it is extremely important. Think about insurance as the “defense” of a financial plan. Owning insurance can’t help you to increase your net worth, but it can help you to avoid your net worth being wiped out due to an unexpected event. I recommend self-insuring the things that you can afford on your own and purchasing insurance for the catastrophic risks that could derail your financial plan. The three types of insurance that I most often see people lacking or being under insured are disability, life, and umbrella insurance. At the least, double-check to make sure that you are adequately covered in these three areas.
5. Practice Thankfulness
This one might seem like it is out of place in a post about improving your financial life, but giving thanks has a significant impact on spending habits. Make a goal of ending each day reflecting on two things that you are thankful for. This will help you to be more content with all of the things that you already have and less focused on always needing to have the best of everything.
Would it be beneficial to your financial life to implement any of these New Year’s resolutions this year? If so, which one(s)?
I’d also love to help you implement any of these resolutions in your life. If I can be helpful, just let me know. And if you’d like to receive my future blog posts by email, please sign up for free by clicking here.
Photo courtesy of Carol VanHook