Setting Financial Goals

In addition to health and personal resolutions, the start of a new year brings the perfect opportunity to reassess your financial health and set goals to improve it. Courtney Alev, consumer advocate for Credit Karma, said, "Entering a new year doesn't erase all our financial challenges from the prior year. But it can really help to bring a fresh-start mentality to how you're managing your finances."

When setting your financial resolutions for 2025, it is important to establish the "why" of each goal. "If you can attach the financial goal to a bigger life goal, it's much more motivating and more likely you'll continue on that path," said Matt Watson, CEO of Origin, a financial tracking app. No matter what your goals are, make sure they are specific and measurable. For example, "save more money" is a vague resolution. Instead, aim for something specific like "save $5,000 for a vacation by October" or "increase net worth by 10% this year."

Here are some actionable goals to consider:

Create a Budge and Stick to It: A budget is the foundation of financial health. Start by analyzing your income and expenses to understand where your money goes each month. Use tools like budgeting apps or spreadsheets to categorize spending. Streaming services, gym memberships, and other recurring subscriptions can add up. Take time to review these expenses and cancel any you no longer use or need. Set realistic limits for discretionary spending and ensure your savings and debt repayment goals are incorporated.

If you're not sure where to start, many financial experts recommend the 50-30-20 method: fifty percent of your take-home income should go toward basic living expenses like housing and groceries, thirty percent should go toward discretionary expenses like entertainment and clothes, and twenty percent should go toward savings and paying down debt.

Build (or Boost) Your Emergency Fund: An emergency fund provides a safety net for unexpected expenses like medical bills, car repairs, or job loss. Aim to save at least five to six months' worth of living expenses. If starting from scratch feels daunting, break it into smaller monthly savings goals. Make saving effortless by setting up automatic transfers to your savings account. Decide on a percentage of your income to allocate monthly, ensuring your financial goals remain a priority without requiring constant attention.

Pay Down Debt: High-interest debt can hold you back from reaching other financial goals. Focus on paying down credit card balances, personal loans, or other debts. Financial coach Rita Soledad Fernandez Paulino noted, "That's going to require you to send in more than just your minimum payments, so create a plan." Strategies like the snowball method (paying off smallest debts first) or the avalanche method (tackling highest-interest debts first) can help.

Remember, financial improvement doesn't happen overnight; it is the result of consistent efforts and mindful choices. Start small, celebrate your progress, and adapt your plans as your financial situation evolves. Cheers to a financially healthy year ahead!