Sticking to financial resolutions through the new year
According to Great Waters Financial, a recent study showed that 37% of Americans have a goal to grow their savings in 2022. Local Financial Advisor Barry Bigelow says that is a great start but make sure you are being specific with your goals. What are you saving for? And how much do you want to save? He says once you set a goal, figure out what you need to do to accomplish it. An easy way to create smart money habits is to break your goals down into smaller goals.
When it comes to your financial goal, Bigelow says to take week one to evaluate your budget and take inventory. He says most people will find their financial goals can be reached if they have a budget. It helps determine exactly where your money is going so that you see where you need to make changes. He also recommends you check your bank accounts for spending habits, and take a look at the debt you owe – student loans, car loans, credit card payments. Make a list and keep track of your balances, interest rates and payment due dates to make sure you’re not racking up any unnecessary fees. Then he says, look at all your other expenses – utility payments, cell phone bills, groceries and entertainment.
It’s important to have an emergency fund, no matter what the circumstances, especially if you used your emergency fund in 2021. So Bigelow suggests replenishing it with enough money to cover at least 3 to 6 months of your expenses. One way he says you can start saving is to pay your future self before you spend. You can do this by setting up automatic transfers from your checking account into a savings account.
Any strong financial plan incorporates both the short and long term. If you don’t picture yourself working in retirement, you need to create a plan that will last. Bigelow recommends his clients put away 10-15% of their salary into a 401(k) or IRA. To quickly check if you are on track, he has 4 milestones:
- The first milestone is at age 30. You should have your annual salary saved in a retirement account, like a 401(k).
- By age 35, you should have double your annual salary saved.
- The milestones keep building on each other. You should have eight times your salary by age 60.
- Finally, your ultimate goal is ten times your annual salary by age 67.
If you got off to a rocky start, and making a budget or saving for retirement feels overwhelming, ask for help. Bigelow considers asking a close friend, roommate or spouse to keep you accountable. He also says you can set a time to check in with each other on a regular basis to discuss challenges and progress.
If you need help making a plan, Bigelow has a helpful goal-setting worksheet on Great Waters Financial’s website.