It’s a situation familiar to many Americans: After indulging during the holiday season, the new year rolls around and it seems there’s no better time to make a permanent lifestyle change than Jan. 1. However, statistics suggest that just 8% of people achieve their New Year’s resolutions.
For those with money issues who want to improve their financial situation by Dec. 31 of next year, however, there are ways to increase your odds of success. Here are four financial New Year’s resolutions anyone can make to improve their financial lives.
Resolution #1: Automate Your Finances
The reality is that 80% of New Year’s resolutions vanish by February. This high rate of failure isn’t new to anyone who’s ever tried to adopt a new habit. It can be hard to sustain change.
But financial habits can be a little bit different. Unlike a diet, where you have to actively control what you consume, there are plenty of ways you can automate your financial life so your new habits are hard-wired into the system you build. These may include:
- Moving any relevant bills and subscriptions to a credit or debit card when possible. Setting up automatic payments ensures the bill is paid on time, creates less work for you and helps you earn rewards. These benefits will help you stay motivated while you make new financial habits. Just be sure to pay your credit card bill on time and in full each month to avoid interest fees.
- Using your bank’s full service options. Need to cut a check to the landlord? Ask your bank if it will automatically send a check for you. This will make your rent check just another item in your budget—and not a routine activity that demands your regular attention.
Resolution #2: Plan to Pay off Debt
Automating your finances will require a little planning—but once you do it, you’re on the way to financial wellness. The same is true with paying off debt. It requires a little upfront planning, but you’ll build momentum and will soon see results.
Statistics show that 33% of all debt is revolving, such as credit card balances. And with the average debt per cardholder at more than $5,000, there’s some progress to be made.
The good news is that alleviating debt is an investment that pays immediate returns. The less debt you have, the less interest you’ll have to pay until there’s none at all.
Resolution #3: Plan for Retirement
If retirement is far in the future and you haven’t made a plan to save for it yet, then you’re in luck. Opening a retirement fund is a simple process, and there’s a lot of time for your savings to grow. There are many types of retirement accounts to choose from, such as a Roth IRA, which allows your investments to grow tax-free. Talk with your financial institution to find out which retirement plan is right for you.
After that, remember your first resolution: automate. Set up automatic contributions for your retirement fund, whether it’s from your bank account or from your employer. You’ll find that even a small amount of retirement funding can help build momentum for the future. When you decide to ramp up your retirement investing, it will be an easy update to make.
Resolution #4: Monitor Your Credit Score
Building good credit will have a positive impact on your entire financial life. Monitoring your credit score is the first step to managing your credit and your relationship with lenders. A good credit score can save you money throughout your life by helping you qualify for favorable terms on loans, credit cards and other financial products.
Take advantage of credit-monitoring services that your credit card issuer or bank may offer.
You can make sure your financial New Year’s resolutions don’t fail by setting realistic goals, automating your finances and committing to making small changes over time.
About the Author: Joe Resendiz is a former investment banking analyst for Goldman Sachs, where he covered public sector and infrastructure financing. During his time on Wall Street, Joe worked closely with the debt capital markets team, which allowed him to gain unique insights into the credit market. Joe is currently a research analyst who covers credit cards and the payments industry. He earned a bachelor’s degree from the University of Texas at Austin, where he majored in finance.