It’s that time of year again: new year’s resolution season. Along with the resolutions to get fit and eat healthier, the next most common resolution is to set and attain personal finance goals for the new year. If you’re one of the millions of Americans who want better financial wellness for yourself in 2019, I have some tips for you.
Create an Emergency Fund
An emergency fund should contain at least $1,000 – enough to cover emergency expenses such as a trip to the ER if you get sick, or to the mechanic if your car breaks down. The problem with emergency funds is that it often becomes too tempting to dip into them for non-emergency expenses, so a good tip is to keep your emergency fund in an account with a bank other than the bank where you keep your checking account. It should also be set up so that you can access the money in the account, but not immediately. If it takes you a few days to get your money, you’re less likely to withdraw it unless you truly need it.
Pay Down Debt
This can mean anything from paying off one small debt to making extra payments on a larger debt (or both). For example, you can finish paying off one credit card, or you can make an extra payment on your student loans over the course of the year. As long as you’re taking steps to pay down debt, you’ll get yourself closer to a more secure financial future.
Save for Retirement
If you have a 401(k) or IRA, you have a limit on how much you can contribute to those accounts each year. Did you max out this year? If not, make a plan to max out your contribution in 2019. And don’t forget it’s not too late to max out your contribution for 2018 – you have until April 15th to contribute to your retirement account for 2018.
If you’re already contributing the full amount to your 401(k), consider getting an IRA as an additional retirement fund and max out your contribution limits to both accounts if you can.
Go on a Shopping Ban
A shopping ban is a defined period of time (it can be as little as a week or as long as a month) during which you decide not to spend any money. Groceries can be an exception, and you should still pay your bills, but consider all the other things you might spend money on in the course of a week or a month: coffee; movie tickets; clothing; entertainment; drinks; eating out, etc. Stick to the essentials and see how that changes how you think about your money.
This is the simplest, and probably most important ingredient in any personal finance plan, and yet so many people fail to implement it. Take a good, hard look at your income and your expenses, then determine how much you can spend each month. Be sure to include a savings plan in your budget.
Invest in the Stock Market
This doesn’t have to be as intimidating as it might sound, especially with the very sharp downturn we saw the stock market take last month. But guess what? Right after stocks have plummeted is the best time to buy stocks – they’re going cheap and then you’ll be perfectly positioned to take advantage of the rise in stock prices when the market corrects itself. It’s also the best time to contribute to your IRA or 401(k) for the same reason.
Looking for more ways to get your finances in order this year? I can help. All you have to do is reach out.