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If you're ready to reevaluate your finances, making New Year's resolutions can help you identify areas of your budget, savings plan or debt payoff strategy that are ripe for change. But know that you don't have to overhaul every part of your financial life right away.
In fact, choosing small, measurable goals—which you regularly celebrate achieving—can help keep you motivated. That makes it more likely you'll build positive habits that last.
Try to set one or more of these money resolutions for 2020, and put yourself on the path to greater confidence in your finances—and more money in your pocket.
1. Review Your Expenses
To meet nearly any financial goal, trimming unnecessary expenses from your budget should be the first step.
Pull up at least one month's transaction history on your bank and credit card company's online portals. Identify up to three recurring expenses that you can trim. Can you plan to keep breakfast items and coffee at work to avoid picking them up on the way? Are there any unused subscription services or memberships you've been meaning to cancel?
You don't need to stop ordering takeout completely, for instance, or make major lifestyle changes immediately. Focus on two or three expenses to cut back on for a few months. Then when you're ready, evaluate how your cutback is helping and if there are other habits you can alter to save money.
2. Attack a Single Debt
To make New Year's resolutions work, the American Psychological Association recommends focusing on changing a single behavior, and keeping the ultimate goal realistic. That means that if you're overwhelmed by debt, making a general resolution like "Pay off debt" can be hard to achieve and may make you feel defeated before you even start.
Instead, pick one debt to attack, and give yourself a timeline you're likely to stick to. Choosing the debt with the highest interest rate is often the best option, since paying it off will save you the most money over time. Paying off high-rate debts first is called the debt avalanche method, while paying off smaller debts first is known as the debt snowball method. The debt snowball won't save you the most money, but the frequent success of paying off smaller debts could help keep you motivated.
Say you decide to focus on getting rid of a $2,000 credit card balance. Perhaps you choose a goal of June 1 as your payoff date, and before then, you apply bonuses, tax refunds and savings from expenses you've decided to trim to the debt. Once you hit that goal, you might feel more ready to pay off other debts.
3. Check Your Retirement Readiness
Saving for retirement is a long game, but the new year is an opportunity to assess where you stand and make changes to your savings rate if necessary.
Start by using a retirement calculator to estimate how much you'll likely need to retire. The Social Security Administration website will give you a personalized estimate of your federal benefits. From there, you can use tools offered by your workplace retirement account administrator or plan providers like Vanguard to see how much more you should save for a comfortable retirement.
If there's a gap you need to fill, aim first to increase your savings rate to at least the amount your employer will match in your 401(k), if that's a benefit offered at your workplace. Experts recommend saving 15% of your pretax income for retirement. But if you can't reach that just yet, increase your rate by 1% or 2% this year—and every time you get a raise—to get as close to that guideline as possible.
4. Ask for a Raise
Speaking of raises, if you believe you're due for one this year, resolve to ask for it. Ideally, you'll increase your income but live the same lifestyle as before. You'll be able to allocate the extra money in your paycheck to retirement or emergency savings, college savings for your kids, debt repayment or other goals.
Prepare for the conversation with your boss by writing down what value you've brought to the company in the past year. Use data if possible—how many new clients you've brought on, for instance, or how much you've helped the organization save by introducing more streamlined processes. Keep records of your wins throughout the year so you can refer to them in preparation for the ask.
Research the market rate for the role you're in, taking into account your experience level, using resources like PayScale, your alumni network and professional connections. That will let your boss know you've done the research and that the ask is in accordance with industry standards for your level of responsibility. And before you meet, practice, practice, practice.
5. Upgrade the Products in Your Wallet
You may be using certain financial products out of convenience, or inertia, because the process of upgrading them seems complicated. But you could be missing out on savings.
For instance, take a look at your transaction history and see if any checking account fees show up that you didn't expect. Are you paying maintenance fees or out-of-network ATM fees? Look into switching to a credit union that may charge fewer fees, or an online bank that might offer higher interest rates on money you keep there.
If your credit score has improved since you last shopped for a credit card, you might also consider applying for one that offers cash back or travel rewards. Use your card regularly but responsibly—meaning you pay off the balance each month—and rewards you earn could effectively lead to a discount on purchases, or to free travel in the future.
Celebrate Every Win
No matter which resolutions you set, make sure to build in opportunities to celebrate financial goals you reach.
That doesn't have to mean spending a lot of money on a big dinner out; you can picnic in your favorite spot in nature or plan a potluck with friends. Smart money management takes time and effort, and won't pay off instantly. Give yourself the compassion to acknowledge that one modest change at a time is still worth celebrating.