Financial New Year’s Resolutions
Popular New Year’s resolutions include losing weight, eating healthier, traveling more often, and becoming financially stable. It’s never too late to fix past financial mistakes, but the beginning of the new year is one of the best times to start. Make a financial plan for eliminating debt, sticking to a budget, building an emergency fund, diversifying your investments, and saving for retirement in 2018 with this comprehensive guide.
Pay off debt
You can’t put aside money for savings or make investments if you are financially burdened by debt. The faster you are able to pay it off, the less interest you’ll be charged. You should avoid large purchases, such as a new car or expensive gadgets until you are living debt-free. Charging items to your credit card should be the last resort in an emergency situation, not the method of financing your next vacation. Pay off the debt with the most interest first, and work your way down to the lower interest debt. Student and car loans typically carry the most interest, but this may vary depending on your individual situation.
Stick to a budget
Although the concept of budgeting is simple, the practice of creating and committing to a budget is challenging. However, a realistic, manageable budget is essential for financial security. Without a budget, you can’t effectively pay off debt, save for an upcoming expense, or create an emergency fund. The money left over after rent/mortgage payments, utilities, and other essential expenses will make up your monthly budget. Decide on how much you can spend on gas, groceries, shopping, and entertainment. A budget should keep you from overcharging your credit cards or draining your bank account.
Build an emergency savings fund
An emergency fund acts as a personal insurance in the case of a sudden job loss or other unforeseen financial strain. Ideally, you should have a minimum of three to six months’ worth of living expenses saved in a bank account at all times. Never dip into your emergency fund for non-emergency expenses, no matter how much you want a new TV set. If the economy is in a recession, or if you are in an unstable job, try to put even more money away in savings, even if it means cutting back on other expenses. If you were to be suddenly laid off, do you have enough money saved to cover a few month’s worth of rent?
Diversify your portfolio
Once you’ve paid down your debt, your next resolution should be diversifying your investment portfolio. The investments you choose will be based on a range of factors, including your age, stage of life, available time, and what you can afford. Realistically, how much time do you have to monitor your assets, and what specialized knowledge do you need to properly manage them? If you are considering adding to your investment portfolio in 2018, you need to take the time to develop a thorough understanding of the property, stocks, or other investments you are considering.
Save for retirement
If you are in your early twenties or thirties, it may seem like your retirement is far, far away. However, you’re never too young to start saving for retirement– in fact, the earlier, the better. Again, this is where a budget will come in handy: without knowing how you are spending your money, you won’t know how to save it. Another option for retirement savings is entering a 401(k) match program with your employer. However, you may be contractually bound to your employer for five years or more before you can keep your employer’s contributions. Consider talking with a financial advisor for help selecting the best 401(k) plan and the wisest investments for retiring comfortably.
Creating financial resolutions for the new year is important, but it is even more important to follow through on them. At Bank of the Lowcountry, we want to help you achieve all of your financial goals for 2018. Contact our experienced representatives at (843) 549-2265 for personalized advice and assistance.
