Making Financial Resolutions For the New Year

Written by: Stephen Frick, Wealth Manager & Partner

While making New Year’s resolutions is a fun tradition that comes back around at the end of every calendar year, it’s not always a productive one. In fact, the vast majority of new year goals do not last the entire year, with roughly 80% of Americans failing on their resolutions by February. [1] Therefore, one has to be careful when making financial resolutions at the start of the new year, as there is a good chance that they could fall through.

That said, financial New Year’s resolutions are not without value — if you set yourself up for success. Simply saying “I want to save more money” or “I want to make a retirement plan” will likely not be enough. Instead, you should aim to tie your financial resolutions to an overall financial plan that encompasses a living, breathing strategy; a plan that can be reviewed annually and changed as needed.

Why Financial New Year’s Resolutions Matter

New year financial resolutions matter most because of the high risk of failure. When setting financial New Year’s resolutions, you should not take them lightly. Look at them as real changes that you wish to make to your overall financial plan. Whether you want to see greater ROI on your investment portfolio or increase contributions to your child’s college fund, the key is developing a multi-faceted strategy to actually see your goal through to the end of the year (and beyond).

How to Set New Year Goals That You Can Achieve

In order to make a financial resolution that can actually work for you, consider how you want to improve your finances in general. This way, you have a better chance of incorporating your goals into a workable plan. So, here are a few strategies and ideas to help get your New Year financial resolutions started on the right foot:

• Set up or review your household monthly budget. Focus on the cash coming in versus the cash going out on a monthly basis. This will comprise the most vital elements of your short-term finances, as well as your long-term financial plan. In doing so, you can find ways to make continual improvements.
• In the event that you have a surplus of cash, remember to pay yourself first. Think of yourself as a creditor and pay yourself before paying over and above your minimum loan or mortgage payment. Having cash on hand ensures that you can deal with financial emergencies if and when they arise without needing to go into further debt (or take away from your retirement funds).
• Make sure you have retirement accounts in place and are contributing at least the amount that your company will match. If your company doesn’t offer a retirement plan, open an IRA. And if your cash flow allows it, contribute up to the maximum allowed by your retirement plan. In 2024, an individual can contribute up to $23,000 into a 401K ($30,500 if 50 or older) and $7,000 into an IRA ($8,000 if 50 or older).
• Pay down debt at a steady pace. Some debt is healthy, especially if it fits into your budget.  In what has been a historically low-interest-rate environment, it is likely that you have low-interest rates on your home or vehicle loans. If those payments fit into your monthly budget, don’t feel like you have to escalate the paydown of those loans. After all, you may never get debt this cheap again. But if you have high-interest debt, such as credit card debt, it would be smart to set up a payment plan with your surplus cash flow.

Making Financial Resolutions With Merit

Ultimately, a financial New Year’s resolution is useless if it doesn’t serve your larger financial goals. Moreover, you need to make sure that you give greater importance to financial resolutions, as they can be much more impactful on your long-term wealth and well-being. Fortunately, by working with a financial advisor at Merit, you can get the help you need to set realistic, actionable financial resolutions and improve your finances year after year.

For professional help setting your own financial resolutions for the new year (and sticking to them), be sure to contact Merit Financial Advisors today!