Yes, it is that time, again. Time to consider how to improve some facet of our lives in the context of New Year’s resolutions. Research indicates that the top three resolutions people make tend to include eat healthier, exercise more, and save money. We at Regions agree that the start of the new year is a good time to reboot personal finance habits. Please allow me to suggest three for your consideration—reduce debt, save for retirement and organize finances.
Regions has several tips on how to improve your financial health and accomplish one, two, or all three of these possible New Year’s resolutions by breaking down your financial goals into simple, achievable steps.
Reduce Debt
In addition to a mortgage, most Americans owe money on credit cards, car payments, and student loans. The average American household with credit card debt owes around $16,000. To reduce debt in 2020, break down your debt-reduction goal into something that is actionable, attainable, and measurable.
Start by writing down a well-defined, quantifiable goal, like paying off your credit card by the end of the year. Then figure out how much you’ll need to pay off each month.
Once you understand how much you want to pay monthly, evaluate your budget to see where you can easily find the money by cutting down on some discretionary expenses. Some easy ideas might be to eliminate the daily $5 gourmet coffee or purge your subscriptions. If your debt is high, you may need to take more significant measures like getting a roommate, moving to reduce your rent, or replacing your current car with one that has lower maintenance and operating costs. Paying off bigger debts can seem overwhelming, but by looking at your larger budget items, you may find ways to pay down your debt more quickly.
Once you have established the amount you’ll pay off monthly, set up automatic payments and keep tabs on your account balances so this recurring payment does not overdraw your checking account.
Finally, don’t expect perfection. Everyone overspends once in a while. The key is making sure you don’t miss a loan or credit card minimum payment because that will negatively affect your credit score.
Save for Retirement
Reducing debt sets you up well to save for retirement. Not only does it teach you the healthy habit of saving, but it also enables you to save more toward your retirement.
Decide how much to save. There’s no one rule that works for everyone, though some experts recommend putting aside enough to replace between 70 and 90 percent of your pre-retirement income. You need to identify an amount that’s right for you based on your lifestyle, when you want to retire, your income now, and your expected income in the future.
Pay your “future self” before your “current self.” Set up an automatic transfer to your retirement savings account every payday so that the money for your retirement (your future self) is put aside before you consider it discretionary income. A lot of people save what’s left over after they pay other expenses, which means they are paying themselves last.
Finally, consider how to invest and consider consulting a professional for advice. When searching for a financial professional, look at how the financial professional charges for his or her services and consider his or her qualifications and experience e.g. what certifications he or she has.
Our team of Regions associates across Jackson offer in-depth conversations to help meet financial needs and develop plans unique to your specific retirement goals.
Organizing Your Budget
Digital platforms are helpful for achieving financial priorities. There are many digital tools available today to help you budget, track your expenses, pay off debt, and identify deals for ongoing expenses such as insurance. Many banks also offer do-it-yourself financial management tools for budgeting, saving, managing debit, borrowing, investing, and more.
Carve out some time early in the year to evaluate the online tools, apps, and calculators that can help you organize your finances, save time, and track and achieve your goals. Make an appointment with your banker, who can help you organize your finances and integrate digital tools into your plan.
In the end, the key to meeting your financial goals in 2020 is to establish healthy habits like monitoring your budget and sticking to your savings and retirement plans. Over time, smart money choices become habits, and habits become second nature. Keep your eye on the prize of reducing stress about debt and savings.
Happy New Year.
Robert Leard is Metro Jackson Market Executive for Regions Bank
