Five Financial Resolutions for the New Year
Between planning for the holidays and tying up the year’s loose ends, the end of the year can be a stressful time. But the holiday season – full of eating and spending – can also spark the excitement of a fresh start and positive changes for the upcoming year.
In a recent survey conducted by Fidelity, 37 percent of those surveyed planned on making financial resolutions for Jan. 1, up from 31 percent last year. For many, the new year means getting their finances on track once and for all. Here are five resolutions for the New Year to make and keep to ensure that you are in a better financial position than you were a year ago.
Max Out Your 401(k) Contributions
Most employers match employee contributions to 401(k) plans in order to attract and retain talent at their company. You should aim to contribute as much as you can to get the maximum amount of money matched from your employer. Otherwise, you might be leaving free money on the table!
In 2016, employees can contribute $18,000 (plus $6,000 more if they’re 50 or older). In the new year, check with your employer to make sure you are maximizing this opportunity and consider increasing your contributions to your 401(k).
Increase Your Savings
If there’s one lesson we learned from the Great Recession, it’s that emergency funds are extremely important. After all, we have defaulted on more than a quarter of a trillion dollars since 2009. That number would have been a lot lower if more of us saved money consistently.
Even if you aren’t living “paycheck to paycheck,” you probably do not have too much difficulty spending your money. One of the most common expenses for Americans this year has been dining out. In a study conducted by Principal Financial Group, 24 percent of Americans admitted that they “blew their budget” while dining out — up from 22 percent last year. If you go out less frequently and cut down on unnecessary expenses, you can put additional money towards your emergency fund, retirement savings, and investment portfolio.
Pay Off Debt
Short of money this holiday season? Don’t worry about it. You can just charge it on your credit card. It seems that’s what just about everyone else is doing.
By the end of the third quarter of this year, the average household’s credit card debt was 34 percent greater than it was a year before and 76 percent greater than it was two years before.
With the Federal Reserve raising interest rates for the first time in nearly a decade, 2016 is the year to finally commit to reducing your debt. Since many credit card interest rates are variable, the annual percentage rate (APR) will likely rise as the central bank continues to raise rates.
High-interest debt can make it very hard to get ahead financially. In 2016, make it a priority to pay off your debt to remove yourself from high-interest payments.
Improve Your Credit Score
Having a bad credit score can cost you a fortune over your lifetime. Think about all the extra money you are spending every month for the interest on your credit card bills and insurance premiums.
In 2015, you should aim to pay your bills on time and check your credit score consistently to make sure you are making a conscious effort towards improving your credit score. Check out our five simple tips for improving your credit score in 2016.
Automate As Much As You Can
One of the most easily avoidable mistakes people make in regards to their finances is missing payments. Often due to carelessness, we forget that late payments can have serious ramifications on your financial life and credit score.
The easy solution: automate your payments. Luckily, avoiding such mistakes can be as simple as setting up recurring monthly payments from a checking account. While automating your payments can help you avoid late fees, remember to review your monthly statements to make sure you aren’t being overcharged.