Starting the new year on the right financial footing
By: Ashley Ann Reich
If you are like me, the Christmas decorations came down in a hurry. I am not a Scrooge, but I am one who loves cleanliness and the idea of starting fresh. There is something to be said for reflecting on the past year while looking ahead to a new year with anticipation and hope. For me, I have huge financial goals in 2024 and many others are looking to get out of debt, boost savings, and start progressing well for the future.
To make progress in the new year, you need to spend some time reflecting on the past. A helpful exercise when looking at your finances and considering the year ahead is to answer the below questions:
- What went well?
- What did not go well?
- Where did I bust my budget?
- Where do I need to tighten up?
- Did I meet my goals this year? Why/Why not?
- What are my new goals?
Whatever your financial goals are for 2024, one suggestion is to ensure that your goals are measurable and time-bound. I always find value in physically writing my goals either in a journal or on a piece of paper that I can refer to regularly to see how I am progressing throughout the year. In the evaluation process and answering the six questions above, it is important not to judge your lack of progress or responses but rather be honest and make a concerted effort to meet them in the new year. Also, make sure your goals are just that – your goals. In our world of constant comparison, your financial situation is likely very different than those that you are following on social media. Be realistic with your financial picture and make goals that are achievable and specific.
As you look to the new year, there are many ways to make traction financially. The next year has historically provided a slight increase in investment maximums in retirement and IRAs. For 2024, 401(k) and 403(b) maximums rose to $23,000 and IRAs to $7,000 annually. If you desire to invest more of your money in retirement or investments, this is a great year to begin this practice, as more of your hard-earned money can be put toward retirement.
If you want to begin budgeting and tracking your regular and irregular expenses, start with a simple budget. You do not need anything complex – a pen and paper will do initially. If you want to utilize more of a modern approach to budgeting, consider an app, like EveryDollar, that will link to your bank account and track your expenses, allowing you to put a “name” to each purchase. Whatever you do, do not give up after a month. Budgeting typically takes around three months (or three budgeting cycles) to get the hang of it. Budgeting is the first step to helping you with any financial goal – you have to first see where your money is going before you can make progress in any other area of your finances.
Saving more money for the next year has been a common theme that I am seeing from those making resolutions. It might be time to review your emergency fund to see if you should increase the balance, or perhaps you are considering a bigger purchase in 2024, like a car or a down payment on a home. Putting your money in a high-yield savings or money market account can help you gain some extra traction with higher interest rates going into the new year – many are averaging 4.5%, with some over 5%.
Most individuals will make resolutions for the new year, and surprisingly, it has been reported that two-thirds of Americans are putting a strong emphasis on finances as a part of their resolutions for this year –primarily due to the continued inflationary strains. When economic indicators trend downward, most tend to tighten up, which is not necessarily bad. Times like this can force us to scrutinize our budgets, consider where to make traction in our savings and curb unnecessary spending. Wherever you find yourself in the new year financially, you will never regret spending less and saving more.
Happy New Year!