7 New Year’s Financial Resolutions For A Smart Start To 2024

Let’s face it — setting goals is difficult. We say we want to change, but we often lose our resolve. That certainly applies to money — people often set New Year’s financial resolutions vowing to improve their economic situation, but sticking with these goals can be difficult.

Thankfully, there are some easy steps you can take to improve your financial lot in life.

1. Determine Your Financial Goals

If you’re not happy with your current economic situation, there’s no better time than now to set some new financial goals. By establishing your aims and setting them as your north star, you can take action to achieve them.

Setting and reaching your personal financial goals is the best way to ensure that you can live the kind of life you want, both now and in retirement. Popular financial goals include:

• paying off debt
• creating an emergency fund
• reaching a certain amount in savings
• upping your 401(k) contributions
• saving for a down payment on your first home

2. Create a Budget You Can Actually Follow

The key to making the most of your money is managing how you use it. Setting a budget can be a critical way to avoid getting caught up in overspending or unnecessary purchases. Budgeting doesn’t mean all your money goes to necessities and savings; instead, it’s about balancing the necessities — along with your wants and savings goals — to make the most of your income.

A budget can help you plan and track your finances while also achieving your goals, whether you’re saving for expensive purchases our putting aside money for retirement. Budgeting can also help you save money to pay off debt and avoid future liabilities or unneeded expenses.

Here’s the main reason budgeting is beneficial: It can be hard to understand exactly where your money is going until you track it in detail. By establishing a budget and monitoring your spending, you’ll learn more about patterns in your purchasing that you may wish to change.

Here are a few widely accepted methods of budgeting:

• The 50/30/20 principle: In this method, you divide your post-tax income into three segments:
  • 50% for necessities (such as housing, groceries and health care)
  • 30% for indulgences (like dining out, entertainment and hobbies)
  • 20% for savings and debt settlement 

• Cash allocation technique: This strategy entails earmarking physical cash for categories such as groceries, housing, entertainment and savings. Essentially, you assign a predetermined amount of cash to each category for the month, physically put it into envelopes or containers, and use only that cash for those expenses. Once the cash for a particular category is exhausted, you must stop spending in that category until the next budgeting period.
• Zero-based budgeting: Using this method, every dollar of income is allocated to specific categories, ensuring that your income minus expenses equals zero. It requires assigning each dollar to expenses, savings, investments or debt payments, leaving no funds unallocated by the end of the month.

3. Pay Down Your Credit Card Debt

When you first get a credit card, the idea of spending more than you can actually afford can be powerful. Indeed, the possibility is so enticing that many Americans have been drawn into a cycle of debt — the average credit card debt for an American household is almost $8,000, according to some reports.

But while paying off a credit card can seem like a never-ending cycle of payments, it doesn’t have to be. You can take control of your credit card debt with some concrete steps:

• Debt avalanche method: The debt avalanche method prioritizes paying off obligations with higher interest rates first and working down from there. You make the minimum payment on each debt and then put extra funds toward debt with the highest interest rate. Once your highest-interest account is paid off, you start making extra payments on the obligation with the next highest-interest.
• Debt snowball method: The theory behind the debt snowball method is that you’re more likely to continue paying off debt if you focus on the smaller, shorter-term goal of paying off your smallest debt first. Because this debt is the easiest one to pay off, you’ll pay it off sooner and feel a sense of achievement when you see your account balance hit zero. That sense of achievement motivates you to keep going.
• Credit card consolidation: Putting all your debt in the same place allows you to make multiple debt payments each month, helping you reduce your credit card debt by combining multiple balances into a single, low-interest monthly payment.

4. Make Saving a Priority

We all want to save money, but let’s be honest — it’s easier said than done. The good news is that there are many effective yet simple ways to save money each month. It may sound obvious, but saving money each month is simply a smart financial resolution. Some ways to save include automating transfers to a savings account, limiting your online shopping and planning your grocery purchases so you only buy what you need.

Limiting your online shopping can be a hard step, so here are some ways to gain more control over it

• Analyze your motives and know your triggers. Some people shop online out of boredom or impulsivity. Practice self-compassion while finding alternative ways to meet your needs and wants.
• Delete shopping apps and block tempting online sites. It can become an automatic response to open up shopping websites and apps. To avoid temptation, delete them altogether.
• Think before you buy. How many times have you made an impulsive purchase and regretted it shortly after? You can avoid this by waiting before you buy a new item online. If hours and days pass and you still have a genuine need for it, then consider buying it.

5. Set Up an Emergency Fund

“Life is what happens when you’re busy making plans,” according to a popular saying. In other words, things happen out of nowhere that you just can’t plan for, and they can be as minor as your car breaking down or as serious as falling seriously ill or losing your job. That’s where an emergency fund comes in — it’s money you save specifically for unexpected costs.

The whole point of an emergency fund is to help prevent you from depleting your savings or going into debt due to unforeseen circumstances. Not everyone has this type of fund set aside: just 44% of Americans can cover an unplanned $1,000 expense by using their savings, according to one study. And if you can’t pay for this type of emergency, it often leads to an empty savings account or spiraling debt.

6. Improve Your Credit Score

Your credit score is a three-digit number that shows lenders your risk level — in other words, how likely you are to repay any loans you take out. The higher the number, the more creditworthy — or less of a risk — you’re perceived to be. Your credit score is one of your most important assets, and if your score isn't what you want it to be, here are a few tips and tricks on how to improve your score:

6. Improve Your Credit Score

Your credit score is a three-digit number that shows lenders your risk level — in other words, how likely you are to repay any loans you take out. The higher the number, the more creditworthy — or less of a risk — you’re perceived to be. Your credit score is one of your most important assets, and if your score isn't what you want it to be, here are a few tips and tricks on how to improve your score:

• Pull your credit report to see if there are errors or inconsistencies. If there are, report the error. If derogatory errors are removed, it could be in your favor.
• Take care to make your monthly payments on the due date. One way to do this is to set up your accounts on autopay, so you never miss a payment.
• Several of the major credit reporting agencies have programs that allow you to show proof of paying rent and different types of utilities. This can help to boost your credit score by showing a reliable history of making regular monthly payments.
• Past due or delinquent accounts can have a large negative impact on your credit score. If you have any delinquent accounts, prioritize them and make sure that you are getting them out of delinquency.

7. Invest in Your Future

It’s never too soon to start thinking about your financial future. You can take some easy steps today to set up your future self tomorrow. How? Here are some ideas:

• Invest in stocks: When you buy stock, you’re essentially purchasing a small portion of the issuing company. (You may also hear the terms “equities” or “shares” used interchangeably with stocks.) You can buy and sell stocks through brokerage sites or directly from the issuing company. Remember this, though: the stock market is considered a volatile investment, so there will be many ups and downs along the way. If you can’t resist the urge to sell off your investments when the stock market inevitably dips, you may want to consider investments that are more stable.
• Set up an IRA: An individual retirement arrangement (IRA) offers an opportunity to set aside savings for your future. While saving money for retirement through any account is a good idea, choosing the right retirement account can give your retirement savings more room to grow.
• Contribute to your 401(k) plan: If your employer offers a 401(k) or similar retirement plan, create an account and contribute as much as you can. Many employers also match contributions, providing an opportunity for additional savings.

The Bottom Line: Financial New Year’s Resolutions Can Help Make 2024 Prosperous

Anyone can begin making smarter financial decisions by taking it one step at a time, and the new year is the perfect time to begin this journey. Getting your financial house in order is a good way to start, so Download the Rocket Money^SM app to get a better understanding of your personal finances.