Every year, 45 percent of Americans decide to make New Year’s resolutions, according to research from the University of Scranton. Financially themed resolutions are among the most popular, but less than 10 percent of people actually achieve their goals. This is not a good sign for hopes of improved money management.
WalletHub consulted a panel of experts in the fields of personal finance, business, management and psychology for insight into the best New Year’s Resolutions for achieving financial improvement and strategies for sticking to them.
“The arrival of the New Year generates “fresh start” feelings that can motivate us to meet virtuous goals, and wipes the slate clean, which inspires these feelings and creates beneficial behaviors at least for the short-term,” according to Francesca Gina, Tandon Family Professor of Business Administration at Harvard Law School.
Rich McGrath, Professor of Economics at Armstrong State University Savannah, suggests that families should make financial resolutions together. “Not only does this provide the support system needed to stick to the resolutions, but the whole family needs to be working in same direction.”
What follows are WalletHub's list of top 10 financial resolutions to make in 2018:
No. 10: Look For A Better Job
Every year we look to improve our professional goals with a higher-paying job. The benefits of achieving a higher salary and promotion could actually end up outweighing everything else. You may have to consider relocating to another city or state that has a lower cost of living and an abundance of employment opportunities.
Not all industries and locations offer the right opportunities. For example, the best city for jobseekers in 2018 – Scottsdale, Ariz, according to WalletHub research – has more than one job opening per unemployed resident. Meanwhile, the worst city for jobseekers – Detroit, Mich. – has just one opening for every five unemployed residents.
No. 9: Make A Realistic Budget And Stick To It
The fact that we’re on pace to end 2017 with more than $1 trillion in credit card debt is a bit less surprising when you consider that only about 40 percent of adults have a budget, according to the National Foundation for Credit Counseling. Missed payments and credit-score damage are in our future if we don’t cut back.
The first step in making a budget is to gather your bills from the past few months and make a list of all your recurring expenses. Then rank them in order of importance, with necessities such as housing, food and health-care taking the top spots. After that, you can simply cut from the bottom of your list as your income exceeds your debt.
No. 8: Focus On Your Physical Health
Your physical, emotional and financial health is all connected. According the Bureau of Labor Statistics, the average person spends about $4,612 on health care each year. Money is also our biggest sources of stress, according to the American Psychological Association. And people who get regular exercise tend to have better credit scores.
“If you begin to make small healthy changes to your diet, increase exercise in small increments, and practice yoga and meditation, you will feel better,” says Deborah Bauer, a distinguished senior instructor of finance at the University of Oregon. “Feeling better will lead to wiser financial decisions that focus on the long term.”
No. 7: Get An A In Wallet Literacy
Financial literacy levels in this country are too low. The U.S. tied for 14th globally for financial literacy in a survey by Standard & Poor’s, behind Canada, the United Kingdom and Singapore – just to name a few. Roughly 43 percent of Americans grade their financial knowledge at a C or below, according to the National Foundation for Credit Counseling.
Take an online financial literary quiz. Your results will clue you in to the areas needed for improvement. By implementing new financial strategies for the struggling areas, you can achieve an A in 2018.
No. 6: Improve Your Credit Score By 20 points
According to WalletHub, less than 1 percent of people have the highest credit score possible (850). Fewer than 1 in 6 people have perfect credit scores (800+). And the average credit score is 679. So most people have room for credit score improvement and could save a lot of money as a result.
The best way to improve your credit is to maintain an open credit card account that is in good standing. You don’t need large limits or to make purchases to create good credit, but this will enable you to build a short credit history that you can track. Enrolling in a credit reporting agency will alert you to any progress you make in your credit ranting along the way.
No. 5: Add One Month’s Pay To Your Emergency Fund
A startling 4 percent of Americans do not have a rainy-day fund, according to the Financial Industry Regulatory Authority. People who lack an emergency fund are putting themselves at risk of financial catastrophe in the event of unexpected unemployment or major medical expenses.
Building up some reserves should be one of the first tasks of business for any financial makeover. Create a fund with about 12 to 18 months’ take-home income. But it’s important to understand that won’t happen overnight. You don’t need to put the rest of your financial life on hold until your emergency fund is complete. Rather, chip away at it over time.
No. 4: Use Different Credit Cards For Everyday Purchases And Debt
Using different accounts to serve different financial needs allows you to get the best possible terms on each card. This helps to reduce the cost of your debt, since everyday purchases won’t be inflating your average daily balance. And if you ever incur interest on your everyday card, you’ll know you spent too much that month.
No. 3: Repay 20 Percent Of Your Credit Card Debt
By the end of 2017, we’ll likely break the all-time record and accrue $1 trillion in outstanding credit card balances. Don’t feel overwhelmed yet, considering the average household will owe approximately $8,548 by the end of 2017, per WalletHub.
Make a plan to pay off 20 percent of what you owe over the course of 2018. That would amount to about $1,710 for the average household, requiring monthly payments of $143. A credit card payoff calculator to crunch the numbers in your situation will help, and if you can afford higher payments, try to make them. The sooner you can reach debt freedom, the better off you and your wallet will be.
No. 2: Pay Bills Right After Receiving Your Paycheck
Take care of monthly obligations before spending any money on luxury expenses is a helpful budget strategy. This will give you a better idea of what you can afford and what you can’t. Paying your bills early improves you credit utilization and ultimately your credit score.
If possible, set up two automatic monthly payments from your account: one for right after payday and another for a couple days before your monthly due date. The second payment will help you avoid interest on the purchases made between your first due date and the end of your billing cycle. If this is too much of a crunch on your payment cycle, you may request a change of billing cycle date from your credit provider.
No. 1: Sign Up For Credit Monitoring
Too few of us are familiar with the actual contents of our credit reports, but with so many free credit reporting options available there is no longer any excuse. Become more familiar with your credit report because we assume our credit scores tell the full story.
According to the Federal Trade Commission, as many as one in four people have an error on their report that could affect their credit score. Review at least one of your major credit reports on a regular basis to spot any irregular activity. Enroll in a 24/7 credit monitoring recommended previously. Signing up for free credit monitoring will enable you to receive an instant notification.
To learn more, click here.
