5 New-Year Money Moves Most People Skip — but They Have Huge Payoffs
Written by
Crystal Mayer
Edited by
Zuri Anderson
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The start of a new year is often a time for goal setting, whether for health, finances or relationships. It is a moment to reflect on the past and start anew. Some people take on a workout challenge, choose to stop drinking, or make a vow to prioritize self-care.
And while money-related resolutions also rank high on the list, many people fail to do the things that will actually make a huge impact. Here are five new-year money moves most people skip that have surprisingly huge payoffs.
Investing in Retirement
According to a study by the Pew Research Center, around 30% of Americans make resolutions at the beginning of the year. Approximately 61% of those resolutions focus on money and finances.
Unfortunately, by the end of January many of those goals are broken. One resolution that people of all ages should be intent on keeping is investing in retirement.
As reported by US Bank, a retirement savings plan can start at any age but generally has the biggest payoff the earlier it is started. Someone who invests in their retirement in their 20s and 30s will have a substantial amount of time to take advantage of compounding returns, since their money is invested longer.
The older a person gets, the more aggressive they need to be with their retirement investing. For instance, a 40-yearold should be maximizing contributions, carefully managing debt and planning for large purchases, according to the financial institution.
Setting a Budget
Another common money move that many people overlook is simply setting a budget. A financial goal cannot be achieved if there are no metrics.
As explained by the experts at Morgan Stanley, creating a budget can help create a better understanding of spending and saving habits. It can also help set up a more stable financial future.
The trick is to not only set a budget but also to stick to it throughout the year. It is important to be realistic and to allow for guilt-free spending. Just like with any diet, a budget that is too restrictive will only lead to cheating.
Building an Emergency Fund
A survey by U.S. News & World Report, found that 42% of Americans don’t have an emergency savings fund and 40% of respondents said they couldn’t cover a $1,000 emergency expense.
Having an emergency fund is critical. While most experts agree that the goal should be to save between three and six months of expenses, a small fund to cover unexpected expenses is a good start. Without a safety net, a job loss, large medical bill or unplanned car repairs can result in thousands of dollars of debt.
Paying Off (And Staying Out of) Debt
Many people start off the year with the best of intentions. They vow to pay down debt and avoid putting purchases on credit cards. Unfortunately, life happens and avoiding debt becomes more and more challenging as the year dredges on.
Paying off debt, however, is one of the most important money moves a person can make. It can equate to an extra several hundreds of dollars each year that can then be invested.
Improving a Credit Score
Finally, many people forget just how important a credit score is until they need to secure a loan or rent an apartment. Improving a credit score can help a person get lower rates and faster approvals.
According to Experian, one of the most important factors in a credit score is making on time payments. Debt payment history accounts for 35% of a person’s FICO® score, as reported by the credit bureau. Setting payments on auto pay can help ensure bills are paid on time.
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