As we move into the new year, it’s important to reflect on our life in 2016 and find ways we can improve it this year. For many of us, January of 2017 seems like a reboot — a way to look at our lives with renewed energy and focus.
We all have different lifestyles, different income levels, and different financial goals. But nearly everyone reading this article can share some common resolutions. Building financial freedom is a long process; it’s a marathon, not a sprint. So, while the concept of New Year’s resolutions can be invigorating, understand that these resolutions must turn into habits if they’re to have any sort of lasting impact on your future.
With that said, here are seven financial New Year’s resolutions for 2017.
Financial New Year’s Resolutions
1. Reduce Debt
This may seem common-sense, but it really is number one: work on reducing or eliminating your debts.
Debt comes in many forms, be that student loans, credit card balances, car payments, or a home mortgage. Conventional wisdom would dictate you focus your efforts on the most damaging debts, like high interest credit card balances or private student loans. It’s important to understand the massive psychological impacts of carrying debt and the corresponding benefits of reducing it.
Maybe you have a small bill that you’re paying off monthly. It’s not a particularly high interest rate, and it’s not a large balance, but it annoys you. The satisfaction of having that struck from your balance sheet can have a huge impact on developing strong financial habits.
No matter how you do it, be consistent about paying down debt. Set up automatic transfers from a checking account, or schedule payments as soon as income hits your wallet. Making one-off payments here and there can be mentally draining and easy to forget or ignore. A consistent cadence, however, can bring peace of mind and a sense of organization and purpose.
2. Increase Cash Flow or Assets
Many of you will receive a pay raise this year. Think very critically about how you set aside that money. If you’re fiscally irresponsible and have a tendency to spend, consider an increase in a paycheck withdrawal into a 401(k), health savings account, or IRA. Consider other avenues to increase your net worth as well. This might be a time when you need to be proactive about things like a career change, a move to an area with a better cost of living, or looking into side projects that can earn you money.
A lifestyle change might even be in order. Maybe you trade in your luxury car for a cheaper, more reliable vehicle. Perhaps you consider eating out less, or any of the other popular (and sometimes cliché) resolutions. Again, be consistent and deliberate with how you go about this.
These two resolutions can combine into one simple one: increase your net worth in 2017. The combination of debt and cash flow make up your net worth. While it’s possible to both reduce debt and increase cash flow, if it makes things easier for you, just pick one and focus on that.
If you change nothing with your income but cut your grocery and restaurant bill in half each month, you’ll still be increasing your net worth. And once you feel consistent and in control of that one resolution, you can add more, understanding that you have the willpower and capability to check them off.
3. Develop or Refine a Plan
Financial planning isn’t particularly difficult on a personal level. A budget can be drawn up with little effort, and you can gather a snapshot of your financial state fairly easily. Taking a look at credit card statements, paycheck stubs, and receipts can help you understand the money you’re bringing in and where it’s going. At its most basic level, a financial plan can simply be a budget, so long as you stick to it.
So, if you don’t have a budget, start there. Define as many categories as you feel necessary to accurately portray where you spend your money. Then, understand how much money you pocket each month, and where that money ends up going. Finally, establish your spending limits in each of those categories, so that the amount of income you earn each month is less than what you spend.
Now comes the hard part: sticking to those numbers over the next week, month, year, and decade.
Inevitably, the hope is that your budget evolves, enabling you to direct your income to other areas. Your plan will regularly need refining. The worst thing you can do is to make lifestyle changes that increases frivolous spending.
Look at, and really evaluate, the resolutions above: to reduce your debt and increase your assets. Are you debt-free? Are you maxing out a 401(k)? How about an IRA, or maybe an HSA if you’ve got one? If you have kids, are you contributing to a college savings plan, or are you otherwise setting aside money for their future?
Resource: 8 Black Belt Budgeting Tips
Even if you’re lucky enough to be checking all of these boxes, you can still continue to build wealth through other taxable accounts. Refine your plan over time so that it maximizes your contributions to your net worth.
Remember that a great financial plan is only as good as the person following it. Hold yourself accountable for your decisions. It may even be worth sharing your financial goals with a significant other, close friend, or family member. Revisit your plan frequently and develop financial habits that reflect your objectives.
4. Live Healthier — Mentally and Physically
Healthier lifestyle habits can have the most profound impact on your future. Improving yourself physically — for example, with more time at the gym or healthier eating habits — can boost your confidence, happiness, and self-esteem. Becoming mentally stronger can change your outlook on what’s possible for you and your future.
There can also be significant financial benefits to these kinds of lifestyle changes. Healthy eating means less fast food, which is a common financial vice. It also might mean fewer trips to the doctor or dentist or a less expensive health insurance premium. Building mental health can open up new opportunities, or simply reduce the amount of stress in your daily life. And that is invaluable.
5. Fully fund your IRA
This one is a bigger deal than many folks think. This year, the maximum contribution for those under age 50 is $5,000. Those 50 and over are able to contribute up to $6,000 per year.
Younger readers take note: the dollars you invest today can multiply into thousands thanks to the power of compounded earnings. Experts agree that waiting to start saving for retirement means saving much more in later years to make up for opportunities lost when you were young, so open an IRA account and start saving today.
6. Take full advantage of employer retirement matching
This is another big one. If your employer will match up to a certain percentage of your earnings contributed to your retirement account, make sure you contribute that amount. To do otherwise is basically to short-change yourself out of free money that will be a huge benefit during retirement.
7. Research major expenses
Everyone thinks of savings as little things we need to go without. “Skip the latte,” conventional wisdom says. If you’re spending $5 each day on a mocha skim frappe, then you might be sabotaging your finance goals.
But, you may be sending more dollars out needlessly each month on larger expenses. This year, make it a point to review what you’re spending on phone, the internet, car insurance, life insurance, and other big ticket items. If you’ve thought about refinancing for a lower interest rate on your home, make this the year you research refinancing to see if it can save you money.
Tools to Help You Track Your New Year’s Goals
If your resolution involves anything about money, then Mint.com should be your number one tool. Mint.com is a free online money management tool that brings together all your financial accounts in one place. With Mint, you can monitor multiple accounts like checking, savings, investments, retirement, and credit cards. You can also set and track goals (perfect for a New Year’s resolution) about everything from paying off that balance transfer credit card to buying a home.
With Mint you can easily view your entire financial portfolio with just a few clicks. You can see all your balances and transactions from your computer or from your smart phone. All your accounts will be pulled into Mint and updated automatically. You can set up a budget, elect to receive bill reminders, make goals, and receive free savings advice.
And while we’re on the subject of money, you can also automate your investing with a tool like Betterment. Ideal for those wanting to invest money each month, Betterment gives you access to an array of ETFs that instantly diversifies your portfolio. Betterment is extremely easy to use (I have an account), and you can track your Betterment investments from Mint.
2. Fit Day
If you have ever been to the gym in January, then you know just how packed it is. That’s because one of the most popular New Year’s resolutions is to lose weight and get into shape. It’s not an easy resolution to stick with, but programs like Fit Day can help you stick to your goal. Fit Day is a free online weight loss journal that allows you to track your every move. Fit Day is a food diary, calorie counter, activity log, weight loss tracker, body measurement tracker, health tracker, mood tracker and recipe book all packaged together.
With Fit Day you have access to charts and graphs that give you a visual of what your diet and exercise look like. You can see exactly where your calories are coming from and determine whether you are meeting your daily nutrient requirements. Being fit is not always easy, but with a free program like Fit Day, it’s much more manageable.
3. 43 Things
Accountability can go a long way to helping you achieve your resolutions. 43 Things is a free online tool that can help hold you accountable. With 43 Things you can create a list of goals that can then be shared with the world (or just your friends if you prefer). It’s a way to keep tabs of our goals and it provides a visual to help stay on track.
You can connect with other users who have similar interests and cheer each other on. To help you stay on track with your goals, you can receive reminders, share you list with friends and family, and share your goals with others who have similar goals via Facebook.
4. Joe’s Goals
Joe’s Goals is another online goal tracker that helps users develop good habits. This is a simple tool to use and is designed like a calendar. You just set up your goals and then track them on a daily basis. A daily score is automatically calculated for you so you know how you are doing.
With this tool you don’t just track the positive, you also track the negatives that are keeping you from accomplishing your goals. The negative goals are things you want to get rid of or habits you want to break. For example, if you have a goal of eating out less, but you give in and you eat out, you track this with a negative mark. Your negative marks are visible along with your positive marks and are calculated into your daily score giving you an overall picture of how you did on any given day.
5. Habit Forge
Habit Forge is a simple online tool that helps you start healthy new habits and break the bad ones. After you sign up for a free account you’ll start receiving daily emails that serve as habit reminders. All you do is tell Habit Forge what you want to accomplish and every day you will be emailed a basic question like: “Did you work out this morning?” You will have the option to answer the question by selecting Yes or No. From there Habit Forge will track your progress for 21 days. You can either go at it alone or join a group of people who are working on a similar goal as you for more accountability.
“Be always at war with your vices, at peace with your neighbors, and let each new year find you a better person.” ~Benjamin Franklin
No, 2017 might not be the year that you reach the summit, achieving “financial freedom.” Building wealth takes time, patience, and effort. It starts with laying the proper foundation, taking those first steps, and then following through.
At face value, these resolutions seem simple… perhaps even too easy. However, the simplest resolutions can often be the most difficult to achieve. Start here, building the basic habits that will follow you throughout the years. You’ll be glad you did.
I hope you’ll join me and many others who are looking to lead a fulfilling life, financially and personally. Here’s to health, wealth, and happiness in 2017!