As we roll into a new year, many of us reflect on our past and think about our future. I am grateful for the new beginnings each New Year brings. It’s like a breath of fresh air—an open invitation to make needed course adjustments. As you think about your New Year, consider the following seven financial resolutions to help you have a prosperous 2024.
Resolution 1: Create a workable budget and follow it.
No matter where you are on your financial journey, a budget will provide a roadmap for your money. Begin by listing your sources of income and your monthly expenses. Categorize your spending between necessities—things like housing, utilities, and groceries—and discretionary items like dining out or entertainment. Knowing where your money goes allows you to make informed decisions, and helps you save or invest for the future.
Resolution 2: Build an emergency fund.
Life is unpredictable, and unexpected expenses can arise at any moment. That's why a robust emergency fund is crucial for financial stability. Set aside at least three months of living expenses in a separate savings account. This fund will act as a financial safety net, providing you with peace of mind and protection against medical emergencies, car repairs, or unemployment. Start small if needed, but make consistent contributions to your emergency fund each month.
Resolution 3: Eliminate high-interest debt.
High-interest debt is bondage. Prioritize paying off your debts with the highest interest rates first. Consider consolidating your debts, or negotiating lower interest rates with creditors, to accelerate repayment. You might ask your financial advisor for help designing an effective debt paydown strategy. By tackling your high-interest debt head-on, you'll free up resources, allowing you to save for retirement or invest in your future.
Resolution 4: Save for retirement.
It's never too early to start saving for retirement. Whether you're in your twenties or approaching retirement, making consistent contributions to a 401(k) or an Individual Retirement Account (IRA) is a powerful strategy for long-term financial security. Maximize contributions into your company’s 401(k) plan and match contributions whenever possible. If you're self-employed, explore a SEP IRA or a Solo 401(k). With the magic of compound interest, the earlier you start saving, the more your money will grow over time.
Resolution 5: Invest wisely.
As you save for retirement, ensure your investment portfolio is properly structured and diversified. If you're new to investing, consult with a financial advisor. They can help you develop a strategy aligned with your financial goals and tolerance for risk. Stay informed about market trends and economic developments, and regularly review and rebalance your portfolio. Investing is key to building wealth over your lifetime, so make it a priority this year.
Resolution 6: Develop financial literacy.
Commit to expanding your knowledge about personal finance. Attend workshops, read books, and follow reputable financial news sources. Stay informed about economic trends, investment strategies, and retirement planning. Understanding principles of budgeting, saving, and investing enables you to make informed decisions to pursue your financial goals.
Resolution 7: Set realistic financial goals.
Setting realistic, achievable financial goals is key to staying motivated and on track. Define short-term and long-term objectives, such as saving for a vacation, buying a home, or funding your child's education. Break down those goals into manageable steps, and celebrate the milestones you achieve along the way. Regularly adjust your goals as your financial situation evolves. By clearly defining your financial destination and how to get there, you are more likely to remain committed to your 2024 financial resolutions.
As you begin this new year, remember that financial success is a journey, not a destination. Like most journeys, your financial journey will have unexpected twists and turns. But as you take small, daily steps toward your financial goals, celebrating your progress at significant milestones, you will be amazed at the progress you make.
Steven C. Merrell MBA, CFP®, AIF® is a Partner at Monterey Private Wealth, Inc., a Wealth Management Firm in Monterey. He welcomes questions you may have concerning investments, taxes, retirement, or estate planning. Send your questions to: Steve Merrell, 2340 Garden Road Suite 202, Monterey, CA 93940 or email them to email@example.com.