As this time of year rolls around, many start thinking about New Year’s resolutions, especially when it comes to money. But time and time again, folks fall off the wagon after working toward their goal for a few months or even weeks.
Next year doesn’t have to be like that! There are tried and true ways that you can achieve your resolution goals. Here are some common money resolutions and how you can make them happen in 2020.
Resolution: Stick to a budget
Budgets: everyone wants to stick to one, but most people struggle to do so. Why? Just like with diets, we often try to do too much at once. Instead of feeling excited by hitting goals, we end up feeling deprived.
Instead of setting a strict budget, I advise clients to use an allowance-based spending plan. When using this sort of plan, clients are given a daily, weekly, and monthly allowance that they can spend after taking care of bills and hitting savings targets.
If you choose to use this method, certain tactics can ensure that you stick to it. Set up a separate bank account and transfer your allowance to it each week or month. Only use that account to pay for things outside of your recurring bills and savings targets. Don’t set your savings goals too high when you set up a spending plan. It’s important to avoid feeling restricted.
Resolution: Pay off credit card debt
Working to pay off credit card debt can be difficult. High interest rates can be discouraging — it can feel like debt is growing even as you work to pay it down.
If you want to pay off your credit card debt in the New Year, start by weaning yourself off of credit cards. Make the minimum monthly payment on your card, then pay for everything else using your debit card or cash.
Once you get to cash flow positive, take stock of your accounts. Look at how much debt you’re dealing with, and what the interest rate on each card is.
There are two methods used to pay off debt — the avalanche method, and the snowball method. If you use the avalanche method, you make all the minimum payments on your debt, and put any money leftover toward the debt with the highest interest rate. The snowball method involves paying off the smallest debt first, which can feel like a big win, and then slowly working your way up to the largest debt.
Resolution: Start — and grow — an emergency fund
After sticking to a spending plan, a great goal to work toward is starting — and growing — an emergency fund.
If you want to do this in 2020, I recommend setting up a separate account for savings using a high yield account (Ally Bank or Goldman’s Marcus are great options!). This way, your money can earn a little bit of interest while you save it for a rainy day.
The best way to ensure that you hit your goal is to set up automatic transfers to your emergency fund. Doing so can put your money on autopilot, which means less work for you.
Resolution: Give more to charity
Feeling generous this year? Not only are you doing good for others, but you might even qualify for a tax deduction if you’re a really generous donor. The caveat is that you have to contribute a big enough proportion of your salary to warrant itemizing your deductions.
One way to ensure that you support charitable organizations throughout the year is to set up a monthly charitable donation to the group. This ensures even cash flows for you, and helps the organization know how much money it can expect each month.
Resolution: Tackle estate planning
I get it, it’s hard to work on estate planning. It’s tough to thinking about the death of you or your loved ones. With that in mind, estate planning is one of the most important financial resolutions you can take on.
Start by scheduling an appointment with a trusted attorney. If you’re unsure where to start, ask family and friends for a recommendation.
An attorney can help you to write a will and execute power of attorney, which can ensure you’re cared for the way you want to be if you’re ever too sick to verbalize your needs.
When working with the attorney, be sure to share your financial goals. Consider whether you want your assets to go to your children, charity, or another entity, and have that goal in mind as you work with an attorney. You can also consider working with a financial planner, who will be able to identify ways to save on taxes and maximize giving.
Kristen Euretig, CFP®, owns Brooklyn Plans, LLC, a financial planning firm dedicated to helping today’s women.
These articles are for informational purposes only and do not constitute tax or financial advice. Individuals should contact their financial professional for assistance.