For many of us, a new year brings a new set of goals concerning our physical health, as it’s easy to feel a little gluttony after a month (or more) of extravagant food and probably less time for physical activity. And although these resolutions may be necessary, your financial well-being may also be worth making resolutions about. After a season of spending that is unparalleled at any other time of year for most of us, our bank accounts are likely reeling from the hits they’ve taken, and January is the perfect time to assess financial health.
“The primary obstacle to achieving financial goals is created by the perception that things equal success, combined with our current environment that encourages less savings and more borrowing,” said Matt Jenne, senior vice president, Cleveland market leader. “Many people get off track if they let wants overpower needs, but all things financial must work together—checking, savings, loans, retirement planning—to achieve financial goals, which includes sticking to a budget and having financial awareness.”
Here are five resolutions you should consider making if you ever worry about your financial situation.
Create a budget.
If you or your family doesn’t already have a budget, create one. This means examining your monthly income, breaking it down into specific categories and deciding how much you need to spend in each category. Categories include house/rent payments, monthly bills (cable/internet, utilities, insurance, health club memberships, etc.), food, gas and entertainment. It may take you a month or two to figure out how much you need for each category; for example, if you’ve never paid attention to how much you spend at the grocery store before, you may not know off the top of your head how much you spend on food per month.
“Creating a budget keeps you out of debt,” Jenne said. “Knowing precisely how much you have allocated for a certain expenditure helps steer you from overspending. It also helps you know where your money goes if you often find yourself wondering that.”
Start (or accelerate) a monthly savings plan.
No matter how good your intentions, you’re going to have a month when the budget you created gets blown. Maybe your kid needed an expensive trip to the emergency room; maybe your car broke down. Whatever the problem, you need a savings plan as a safety net in times like this. If you don’t have one, you should start one ASAP. If you already have one, consider accelerating it in 2018. A monthly savings plan can take lots of forms, from a basic savings account to a CD. Another form of saving is to begin planning smartly for the next holiday by opening a Christmas Fund.
“Try to accumulate an amount equal to two months of gross personal income as a reserve for emergencies,” Jenne said.
Take advantage of company offerings.
If your employer offers any sort of savings or retirement option you aren’t taking advantage of, start! Meet with your company’s human resources department ASAP to see what 401(k) and retirement options are available. You should maximize whatever is offered as far as contributions go, especially if your company offers a match—that’s basically “free money” toward your future.
“One of the best things about letting your employer save money for you is you never miss it,” Jenne said. “They take it straight from your paycheck before it ever hits your account, so you never know it was there, yet it’s accumulating for you in another account without any effort on your part.”
If your company doesn’t offer anything in the way of retirement, consider meeting with an experienced banker or investment adviser at a local bank for expert advice. They can help you prepare for your future.
Reduce your debt.
If you’ve been doing the bare minimum to get by with your current debt, up the ante on that this new year. Making the bare minimum payment will only compound your problem, as interest builds and your debt grows larger and larger. Come up with a debt reduction plan that focuses on “bad debt,” like high-interest credit cards. The sooner you can get out from under previous financial mistakes, the brighter the future will be, as you can direct that money to other areas, such as a savings account or IRA.
“Ultimately, no one is responsible for your retirement except you,” Jenne said. “Even the best company plans can’t help if you don’t make the commitment to deposit into them.”
A major aspect of financial well-being is mental. You have to commit to controlling and monitoring your finances for the entire year. You have to be aware how much money is in your account(s) and how you will allocate it for bills and expenses. But local banks can help you with this. Choose one that offers accounts to meet all transactional and savings needs. Make sure they have robust mobile and online offerings that offer you flexible control over your account activity.
“If you make a plan that fits your budget and partner with a bank that meets your product and service needs, you’ll turn your resolutions into reality and achieve financial health,” Jenne said.
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