The start of a new year is a great time to examine every area of your life and set goals for improvement. Like so many of us, you probably included some financial goals in your New Year’s resolutions, like saving more or reducing debt, but you might not have an actionable plan to get there. Setting a goal is the easy part. Laying out the specific steps to get there and committing to them is where the real work begins, but oftentimes, we don’t know where to start. If you want to be on the path to financial freedom, consider making these important money moves this year.
1. Update your budget.
The New Year offers a fresh start. So, you should use this time to review your budget. Take a look at your spending over the last few months to find out where you need to make adjustments. If you anticipate any big expenses this year, be sure to factor them into your budget so that you can stay on track. If you don’t know what you should be aiming for, consider the 50/30/20 rule, which is a good place to start.
2. Increase your income.
The truth is that no matter how much you cut back on your spending, there’s only so much room within your budget. And inflation has raised costs across the board. One way to set yourself up for success this year is to increase your income. You can consider asking for a raise at work, landing a higher-paying job or taking on a side hustle that will bring in extra dollars. Just make sure to find a good balance so you’re not overworking yourself and at risk of burning out.
3. Reduce debt.
Paying down debt can seem like an impossible task, especially when you have an overwhelming amount of it. But the journey of a thousand miles begins with a single step. Make a plan and begin chipping away at your debt as best you can. Include debt payments in your budget. Be sure to pay bills on time and in full to avoid falling into more debt. Reduce the number of credit cards you have, and pay down high-interest debts first. Little by little, you’ll see what may be a mountain of debt decrease to a molehill over time.
4. Review your savings.
It’s essential to have a solid safety net that you can rely on in the event of an emergency or loss of income. Generally, your emergency fund should cover at least three months of expenses, but you may want to save more. Take a look at your savings and determine what amount is best for you and your living situation. Then, be sure to add savings to your monthly budget.
5. Plan for retirement.
Check in on your retirement savings and consider whether you want to contribute more to your 401(k) this year. You may also want to find other investments that can go towards your retirement. Many Americans fail to save enough for retirement, so starting early and checking annually will pay off in spades later in life.