Set Financial Goals For The New Year
Now that the holidays are upon us (and its associated expenses) it is a great time to look at setting goals for 2021. You may be thinking about fitness goals or health goals, but do not forget about financial goals too.
Financial goals can range from debt reduction to maximizing retirement savings and are a great way to establish where you are, and where you would like to go. Make sure you note what your goals are and set up simple accountability – perhaps a notepad with your progress, or a word document – throughout the year to evaluate your progress.
Here are some examples:
- Review how much you are contributing to your retirement accounts.
A good rule of thumb is to contribute at least 10-15% of your pre-tax income every year. If you have been under this benchmark in the past, then you may want to consider contributing more. Remember, the earlier you start the more time you have for growth in your accounts.
- Monitor Your Credit Score/Report
Monitoring your credit is a good way to catch possible fraud. Look at recent inquires from companies and recent accounts opened. Make sure they are all associated with companies you currently have a relationship with.
- Track Your Expenses
Keep track of your expenses for three or more months so you can establish a baseline of what you typically spend. If you know how much you spend, you will be far better equipped to perform other essential financial goals:
- Establish or add to your Emergency fund.
If you are still working, do you know if you have enough saved for a rainy day? It is important to have an emergency fund, which should have three to six months’ worth of living expenses. Set a goal to start funding or increase the balance of your emergency fund.
- Create and stick to a budget
Now that you have a better understanding of what you spend, setting up a budget – or improving your existing one – will include realistic information. Make sure you analyze your budget monthly to know if you are meeting those goals.
- Manage your debt
Are your current debt obligations currently financed at a reasonable interest rate? Now would be the time to set a goal to pay off high interest credit cards or debt on depreciable assets, such as a car. Mortgage rates are at all time lows so perhaps a consolidation loan is appropriate.
- Consolidate Assets
Do you have retirement or investment accounts at many different institutions? Having many accounts is hard to track and even harder to manage. Look into consolidating those accounts to one institution. This will make annual tasks such as rebalancing or tax preparation much easier.
