With the new year just weeks away, many Americans are starting to think about resolutions, and financial ones can be high on the list. It’s never too early or too late to start making changes, adopting new habits or even stopping some that can be detrimental to your financial well-being.
Whether these money resolutions entail increasing your savings, paying down debt or building an emergency fund, they can vary based on your age and your priorities.
“The way I think about money resolutions is that they should be achievable, not aspirational,” said Brian Chevalier-Jordan, chief marketing officer at National Business Capital. “Most of all, these resolutions should set you up for a longer-term return on your efforts.”
Here are some of the moves experts recommend making based on your generation.
Young adults are in the perfect place to develop financial habits that will make their lives better and less stressful and there are several resolutions that can set them up for this, according to Sean Fox, president of debt resolution at Achieve.
Create a Budget
A budget is a spending plan, based on income, lifestyle and goals, so make it simple so that you’ll use it.
“Tally all set monthly expenses — including housing, utilities, student loans, car payments and any credit card debt –and variable expenses, such as groceries, gas and clothing,” Fox said. “Compare to all incoming monies. You’ll get the picture of what you need to do to achieve the goals you have in mind, whether they’re short-term or much longer.”
Commit to Using a Credit Card — Wisely
According to Fox, Gen Zers — even working adult ones — have fewer credit cards, and use them less than any other generation.
“Most people find it helpful to have one credit card they use in moderation, and on which they pay the balance on time and in full every month,” he said, adding that doing so will help credit scores by showing financial companies, employers and landlords a level of financial responsibility.
Resolve To Get and Maintain Health Coverage
Health insurance policies are still available to policyholders’ adult children until they turn 26 — a provision that can make it more affordable for young adults who do not have insurance offered through their employers to maintain health insurance.
“Turning 27 soon? It’s time to research your options so you have no lag in coverage,” Fox said. “Health insurance is your best option to cover unexpected medical bills, rather than going into debt to pay for a health crisis.”
Pay Down Debt
Millennials also should focus on paying down debts and prioritize eliminating high-interest debts, Fox said.
Start Saving Strategically
Chevalier-Jordan explained that this partly translates into living within your means. “Make sure your spending is less than your income. Adjust your lifestyle, if needed.”
Saving strategically means beginning to save for specific goals — whether it’s a house, education or other future expenses, he explained. He recommended creating a savings plan, considering the timing of your future financial needs and considering a mix of savings and investments.
Build a Sizable Emergency Fund
According to Fox, millennials are likely to be in the age range where they’re buying/owning homes and raising families — both of which may be fulfilling but also filled with expenses, expected and unexpected.
“A major appliance or home repair, or a trip to the ER with a child, can set someone back thousands of dollars in an instant,” Fox said. “Set up automatic transfers or deposits with each paycheck to a savings account. Ideally, save 10% or more of each paycheck, but pick whatever percent you can and then stick to it.”
Get Serious About Retirement Planning
It’s time Gen Xers get serious about planning for retirement because these are the peak earning years for that generation, offering the best opportunity to accelerate savings and investments, said Christopher Lazzaro, ChFC, founder and president at Plan For It Financial.
In turn, some ideas to consider include maxing out IRAs, 401(k)s or other employer-sponsored retirement plans or making catchup contributions if you are over 50.
Make a Financial Plan
If you don’t have a financial plan in place, now is the time to create one.
“If you find this task daunting or don’t know where to begin,” Lazzaro said, “seek expert advice from an hourly or flat fee financial planner.”
In addition, review your investment portfolio annually and rebalance as needed to ensure your investments match your risk tolerance and are diversified.
Pay Down Debt
Lazzaro also recommended aggressively paying down any high-rate personal loans or credit card debt.
“Once paid off, re-direct equivalent amount to savings and investment accounts,” he added.
Older Gen Xers and baby boomers are either retired or approaching retirement, and there are some specific moves they should think about.
Resolve To Pay Off Any Credit Card Debt — for Good
As Fox noted, if you pay off credit card debt with an interest rate of 21% — about today’s average — that’s effectively a 21% return on your investment, money that can be going into retirement savings.
“If you cannot pay it off with a strong budget, belt tightening and the avalanche or snowball method, look into a balance transfer or debt consolidation (personal) loan,” he said.
If you’re facing true financial hardship and are really having a hard time with minimum payments, look into debt resolution.
“Whatever you do, make a plan, then commit to following the plan,” he said. “Credit card debt won’t go away by itself.”
Make a Plan To Pay Off Student Loan Debt
“You do not want to go into retirement still paying on student loans,” Fox said, “and believe it or not, student loan debt still plagues many people as they look at retirement.”
According to him, among Achieve’s own debt resolution clients, those ages 51 to 65 had the largest student loan balances, totaling an average of $53,000.
Resolve To Develop a Base Plan for Retirement
Do you think you’ll work part time, travel or pursue a hobby?
“Create a retirement budget, figuring in any pensions, estimated Social Security income and a good dose of reality,” Fox said. “Face the facts if you just won’t have enough money to retire, and make a plan to generate additional revenue. Maybe you can’t retire when you thought [you would] from your current job. Or you may need to start an encore career, consider a part-time job or develop a side hustle now.”
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