So you want to make some financial resolutions for 2020… where do you start? There are so many pieces to financial health that it can feel overwhelming. Not to worry! We’re here to help you spark some inspiration and set realistic action plans to making your financial resolutions a reality.
First of all —congrats on focusing on such an important topic! While fitness and career goals often creep to the top of the list, financial health is SO important—but it’s just not talked about enough. Since you’re already looking to flex your financial fitness muscles, consider this:
A recent Experian study shared that 49 percent of Americans want to save more, 31 percent aim to create a personal budget, and 26 percent plan to pay off a credit card in 2020.
Okay, America! We see you and your financial goals! While these high-level resolutions are a great place to start, being precise can make all the difference. In fact, according to Fidelity’s 2020 New Year’s Resolution Fact Sheet, 51 percent of people who kept their 2019 resolutions set specific goals.
In this article, we are highlighting three common goals: budgeting, paying down credit card debt, and saving. And we will outline some actionable steps to get you started.
Resolution: Create and stick to a budget
We all know that self-awareness is super important. No one wants to be that person with the stanky breath who refuses to accept the mints that their poor victims keep eagerly offering them.
Just like having awareness that you may need to brush your teeth post-tuna salad, having awareness about your sources of income and expenses is incredibly important. This is where budgeting comes into play.
In our first article, we provided a simple monthly budget template. This is a great place to start if you haven’t taken the time to break down your finances. We will wait here while you complete that right quick.
If you have already completed a budget, consider scheduling time monthly to revisit it and see what variables have changed and if any of your spending habits need to be tweaked. Maybe you got a raise (congrats!) and you need to increase the dollar amount you’re saving to reach that 20 percent non-negotiable minimum you set for yourself. Or maybe you’ve been spending a little too much on coffee lately (guilty!) and you need to look at some ways to reign in your spending.
Finally, if you have major events – like a wedding, moving, going back to school, or various income levels over the year (hello bonus season!) – forecasting your income and expenses for the whole year (not just monthly) may be a worthwhile exercise. We’re digging this Annual Budget Tracker Google Sheet that’s publicly available.
If budgeting is the financial goal for you, here are some goal suggestions to help you get started:
Example Budgeting Goals
- I will complete my budget template
- I will complete a monthly income and expense forecast for 2020
- I will revisit my budget template at the end of each month and reflect on line items where I’m overspending.
- For these categories, I will come up with specific goals, such as:
- Only buy 1 coffee a week
- Limit car-share services to a specific monthly dollar amount, then use public transportation after that
- Pack a lunch for work to adhere to my eating out budget of $X
Resolution: Eliminate credit card debt
According to The Balance, the average credit card debt per U.S. household was $8,500 in Oct. 2019. In our savings article, we discussed how important whittling away high interest debt is. “But how do we do that, Anna and SJ?” We’re so glad you asked!
We treat our credit cards like cash. If we don’t have it, we don’t spend it. Why? Because as we discussed in our savings article, compounding interest works against you when you’re in debt.
Per the Federal Reserve’s data, the average Annual Percentage Rate (APR) across all credit card accounts based on data from the first half of 2019 was 15.09 percent, which means you would be charged .041 eprcent interest every day on any unpaid balances. Just for reference, many savings accounts offer interest rates less than 2 percent, so yes, 15.09 percent is an incredibly high interest rate!
Let’s say this is your first month with a brand-new credit card. Woo! Time to put that shiny new chip to work! You end up charging $5,000 on day one of that month (Hello, matte black KitchenAid mixer and new Gucci bag. My pretties!).
When it comes time to pay your bill, you realize you can only meet the minimum payment of $30 – oopsie.
The remaining $4,970 accrues interest of $61.64. Remember, this $61.54 is your interest on one bill in just one month! That’s at least 10 almond milk lattes! As you keep rolling your unpaid balance, the math gets pricklier. In short, things are not looking great for you my friend. For those math lovers out there – here’s some insight into the calculation:
Oh, AND because of compounding interest, you’ll be paying 15.09 percent on any interest that you don’t pay in full the following month and your credit score will take a hit.
Moral of the story: Just say no to credit card debt. If you do have credit card debt or if you want to be more mindful of your credit cards, here are some goals to focus on:
Example Credit Card Debt Goals
- I will set my credit cards to auto pay (just be sure that monthly payment won’t cause your account to overdraft!)
- If in the market for a credit card, I will evaluate options with low or zero percent APR to help avoid interest fees
- If I’m NOT in the market for a credit card, I will not sign up for one, no matter how tempting the rewards! (Most often the rewards don’t outweigh the high interest rates)
- I will look into a side hustle whose proceeds will directly pay down my balance (did you know Instacart could pay you to grocery shop!?)
- I will set aside $X monthly for my emergency fund, so I have a security blanket if sh*t hits the fan – rather than treating my credit card as said emergency stash
Resolution: Increase savings
Would you rather lose 5 pounds or save $5,000 this year? If you picked option B, according to Fidelity’s 2020 New Year’s Resolution Study, you’re siding with the vast majority of peeps. While physical health goals are often flaunted on social media, the stats below show that people value financial fitness just as much, if not more:
When it comes to savings here are our three key takeaways:
- Make saving at least 20 percent of your income a non-negotiable expense
- Find your “personal why.” This will help you design a plan to save and feel more incentivized to save
- Start putting that money to work early so you can reap the benefits of our friend, compounding interest.
Check out our second article for tips and resources for saving your money. If saving more is your top priority, see our suggested goals below!
Example Savings Goals:
- I will write down my “personal why” for saving
- I will commit to putting 1 percent extra into my 401K this year
- I will look into the interest rates I’m earning on my cash accounts and see if I can get a higher rate
- I will save a set dollar amount each month for my emergency fund
- I will look into refinancing my student loans to see if I can get a lower interest rate (credible.com is a great resource!)
- I will evaluate if opening an IRA is beneficial/feasible for me
- I will download a micro investing app and invest at least 1 percent of my paycheck
Phew! We covered a lot of great goals above. Thanks for hanging with us! We can’t emphasize enough how much financial health matters. And we hope this article will catapult you into your 2020 financial goals.
If you’re anything like us and love a good template—check out this one. We challenge you to fill it out and post it to your Instagram (tag as @thewellstreet and we might repost!). Who knows, you just may inspire someone else to take charge of their financial fitness in 2020!
Throwing it back to our last article, we promised you our thoughts on food and fun—including our tips to make the most of your money, AND the moment. Don’t worry, we didn’t forget! We are excited to make the transition to our very own WellStreet platform (shoutout to aSweatLife for hosting our intro article series!). Budgeting tips around food+fun coming soon to our new space. Follow along at @theWellStreet for updates!
And as always, drop us a comment below or slide into our DMs with any questions.
Disclaimer: Anna and SJ of WellStreet are inactive CPAs, not professional financial advisors. This advice is a guideline based on their own experience, research, and advice from others. At the end of the day, you know your financial situation better than anyone.