According to a Fidelity study from 2014, 31% of Americans planned to make financial resolutions for 2015. Of that group, more than half wanted to save more. The median goal was to save $200 per month.
But before you look ahead to the goals you want to accomplish in the new year, take a moment to consider how your money situation changed in the last year. Evaluate your progress so that you can set fresh money goals for next year that are effective, smart, and appropriate for your situation.
1. Evaluate Your Savings
Do you have more in your savings account right now than you did at the beginning of the year? If not, make increasing your savings one of your first priorities for the coming year — particularly if you don’t have enough money shored up to handle a financial emergency. Start with saving one month of your income, then grow to three months.
Once your emergency fund is created and full, you can turn your attention to other savings goals you want to hit.
2. Review Your Retirement Account Contributions
Did you receive a raise this year? Were you able to lower some expenses? Did you get a bonus that you can use to max out your Roth IRA? Have you started a side hustle that generates some additional income?
Make sure you up your retirement account contributions so that your savings keeps pace with your earnings, and so you don’t fall victim to lifestyle inflation.
Not sure how to prioritize retirement savings? If your employer offers a match for retirement savings, that vehicle — often a 401(k) — should be the first thing you contribute to. Invest at least enough to get your match.
And if you’re not already making use of an IRA or Roth IRA, make a plan to open up your own individual retirement account next year. Anyone can contribute to an IRA, but to fully fund a Roth IRA, you need to earn $124,000 or less as a single filer or $196,000 or less as a couple.
Work on hitting those maximum contributions next year!
Examine Your Spending for the Year
Take time to go through your budget and examine what your projected spending was — and what your actual spending added up to. Look at any budgeting tools you use, like Mint, or pull up your bank and credit card statements, and find out where your money went.
Do you feel satisfied with how you used your discretionary income? Did your spending affect how much progress you made with your savings goals? What can you do to correct this in the coming year?
The end of the year is a good time to ask yourself what you can cut back on in the new year, and what changes you can make to either save more, earn more, or do both to improve your financial situation. Look for any leaks in your budget, and make a plan to cut back on wasteful or unnecessary spending in the new year.
If examining your spending is difficult because you didn’t track it, make this the year you set up a system for monitoring your expenses and organizing your finances. Create a budget and stick with it!
Plan for Major Expenses
Before thinking about all the big stuff you want to buy this year — maybe a trip overseas, or new furniture for the new house you saved up for this year — slow down and reflect on what’s really important to you.
Look at the big expenses you took on this year. Did you buy a new house and furnish it? Buy a car? Take a lavish vacation? Whatever your biggest expenses were, take time to reflect on them and evaluate whether or not they aligned with your values. If so, that’s great! It’s good that you understand what’s important to you, and that you know how to spend your money in such a way that you feel satisfied and fulfilled over the long run.
But if you’re feeling guilty about a big expense, or feeling regret over spending so much money on one line item, you need to get serious about identifying what’s truly important to you before you create more big expenses in the coming year.
If you know that you’ll be getting a new car or doing home repairs or renovations, start planning for that now by setting up separate savings accounts for each of those goals. If you know big expenses are on the horizon, plan ahead.
Being more mindful with your money in this new year starts with taking some time to reflect on how you managed your money in the last year.
Once you gain some perspective, you can turn to the coming year and start making a plan for feeling empowered and reaching your financial goals.