The New Year is upon us, and so is the time for New Year’s resolutions. If you have not yet made any financial goals for 2018, the best time to plan for the year is now!
Keeping Your New Year’s Resolutions Past January
New Year is a symbol of new beginnings. It encourages us to look at our long-term goals, think about what we want to accomplish this year and how we want to change. We are feeling energized, motivated, ready to start a new chapter in our lives… But that motivation is often short-lived. Sometimes, the plans we make in December and early January start looking unreachable to us by the end of the first month of the new year.
In order to not get discouraged, we need to find ways to transition from good intentions to good actions. January is definitely a great time to solidify New Year’s resolutions and create a plan to follow through. If you are struggling with the follow-through, here are a few tips that will help you stick to your financial goals in the new year!
- Determine your “why”: Setting realistic goals starts with understanding exactly what you want to achieve and why. Your “why” then becomes your motivation, something that pushes you forwards and makes you stick to your goals, so make sure you have a big enough reason to change and a big enough desire to succeed. Remind yourself of your “why”: put something on the screensaver of your phone, talk about your motivation with your friends, spend time thinking about how it will feel once you achieve your goals. Your final goal could be to get out of debt, to save up for a purchase or a cause, or to simply develop healthy money habits. Whatever your goals are, make sure you remind yourself how important they are to you and why. Remember, if you do not motivate yourself, no one will do it for you.
- Set realistic goals: You know yourself and your habits best. If you want to get on a budget, but you know you don’t like feeling restricted, then going from having no budget to very tight spending habits might do more harm than good, making you feel discouraged quickly. In this case, you may want to cut your expenses gradually and focus on smaller goals and achievements first. It could be a good idea to sit down with a financial adviser and come up with a financial plan that would work best for you. Remember, the key is setting SMART goals: goals that are specific, measurable, attainable, realistic and time-sensitive.
- Use the tools around you: You can also use different techniques to make sure that you gradually move towards your goals. For instance, if you have an overspending habit, you could use the envelope budgeting system: divide your spending into categories and give each category an envelope with a fixed monthly amount in it. This way, you’ll see exactly how much money you are spending and how much is left for the month. There are many other tools and techniques that you can find helpful. For example, you can also utilize online debt calculators to help you stay on track with debt payment, or use your bank for automatic payments or saving transfers. There are many other tools and techniques that you can find helpful as well!
Financial Resolutions for Your Future
Here are a few key New Year’s financial resolutions you may want to prioritize in 2018 to ensure you have a strong and prosperous year.
1. Get out of debt
In our modern society, getting yourself into debt is easier than ever. Whether we are talking about credit cards, mortgages or loans, it is hard to deny that we are simply surrounded by different avenues that encourage us to borrow money from others.
As difficult as paying off debts may be, it is definitely a worthy goal that will only benefit you in the future. Start by breaking down your debts into manageable categories and focus on paying off one at a time. There are several debt payment methods you could consider:
- Debt Avalanche: paying off the highest interest rate debt first, while making minimum payments on all other debts. This method helps you pay the least amount of money in interest.
- Debt Snowball: paying off the smallest debt first, while making minimum payments on all other debts. This is a good method for people who need encouragement and visible progress to stay on track.
You could choose either one of those methods, or use a combination of both. Remember that the goal is to make progress towards a debt-free (and hence a less stressful) lifestyle. Even if you don’t get yourself fully debt-free, you will definitely be further along by the end of the year!
2. Focus on savings
Having a savings account is essential: savings allow you to stay debt-free when “life hits” (as we all know that emergencies happen) and help you reach your bigger money-related goals. Most importantly, having money in a savings account gives you a peace of mind, a sense of security and freedom – and that goes a long way!
If you are just starting saving, your number one priority should be creating an emergency fund. Emergency funds can contain anywhere from $1,000 to the amount equivalent to your 6-month salary (or beyond, if you wanted to). That money would be essential if you were to ever face unplanned expenses, such as unexpected travel, illness or job loss. After you populated your emergency account, you can focus on saving for any large purchases you may have coming up, or simply save for yourself and your family’s future. You could also consider investing in RRSP or getting a tax-free saving account – whatever works better for your financial goals!
3. Find additional income!
As great as saving techniques are, you may want to find a way to make additional income. Diversifying income and finding new ways to make money are becoming more and more common, especially in our global, interconnected world. You may want to pick up a second job for a short time (for instance, to pay off your debts faster), or open up a small business on the side. After all, there may already be something you are good at – why not consider doing it on a freelance basis? Take a chance and do something new this year, and it may just turn out to be your best investment.