New year, new money resolutions? I’m pretty sure that’s how the saying goes.
This January, we not only usher in a new year, but a new decade. And as much as I don’t necessarily love resolutions, I have a tradition of spending a few semi-quiet days over the holidays to think about how I can start fresh for the new year. Inevitably, some of the goals or resolutions I make involve money. And these are the ones I always end up happiest that I’ve kept.
If you are ready to be a little more purposeful and organized with your finances this year, these are some money resolutions you should make.
1. Know your money
I know, I know. Most of us cringe at the word “budget.” So instead, think of this as understanding your cash flow. Getting a fresh start on your financial situation this year should start with knowing how much money you have coming in and where it’s going.
Take some time to look through your past spending. How much are you earning, spending, and saving each month on average? Are you happy with where it’s going?
The goal of this isn’t to cut back on spending, necessarily. It’s to help you redirect money to the things you actually want to do. Maybe you can free up some cash to save for a summer vacation, or use some to start a college fund for your child. That all starts with knowing what you have and making a plan for where you want it to go.
2. Set some exciting goals
The start of the new year is a perfect time to reflect on what we want to do for this next year. If you’re not into setting resolutions, consider setting some goals for yourself and saving for them.
Maybe you’ve always wanted to write a book. Set a goal to get a sitter for three hours every weekend to give you the space to write.
Maybe you want to take the kids on their first family vacation this summer. Set a goal to put away a little each month into a summer vacation fund.
Or maybe you want to change careers to something a little less lucrative, but you have debt holding you back. Look at your money and create an achievable goal to pay it off by a certain date.
The more exciting the goal, the more fun it will be to work toward.
3. Pay down high-interest debt
If your family is hanging onto high-interest debt, this is the year to do something about it. One of the best ways to save money is to get rid of this debt. You’ll not only save money on the monthly interest that you pay each month, you’ll reduce your stress and will likely see an increase in your credit score (which can also save you money).
To make this goal a reality, come up with a plan. Will you put a certain amount from your current budget each month to your debt? Are you going to find a way to make additional side income to speed up your payoff?
Once your high-interest debt is gone, you can start putting money to things that really excite you and your family — and that is a great gift!
4. Get covered
While no one wants to think about bad things happening — especially during the festive holidays — getting covered for the unexpected can bring peace of mind. If you have little ones depending on you, it might be in your best interest to consider getting life insurance and disability insurance. And if you have life insurance, it’s a good idea to consider whether you have enough coverage.
While you’re at it, it’s time to update (or create) your will or trust. Knowing you’ve specifically laid out what will happen to your money if something happens to you will help to ensure that your family will be financially secure, no matter what.
5. Get organized
This is my resolution every year: to get my money and important documents organized. Luckily, doing this year after year makes the process a little easier.
Round up all of your important documents and store them somewhere safe. That may mean making copies and storing on a private server, storing in a safe deposit box, or fireproof safe.
Think about gathering things like:
- All passports, copies of IDs, birth and marriage certificates
- Insurance policies, including life and disability insurance, homeowners and renters insurance
- Financial information including bank account and investment company information (including where your retirement accounts are held)
- Your trust, will, and durable power of attorney
- Medical information including health insurance cards, vaccination records, allergy information, current prescription information, and contact information for current doctors
This won’t be the most fun thing you do all year, but it will help you sleep at night knowing that you’ve done everything you can to protect your family’s important information.
The new year is a time to hit reset and focus on what you want to do — and figure out how you can use your money to help you get there.