We have all been there: waiting with optimism for the beginning of a new year so this time around we can make real, impactful changes in our finances and lives. But before we know it, the “new year” is now “last year,” and we haven’t made much progress towards major milestones in our financial lives.
Although I love markers for new beginnings as they are great motivators for tackling your goals, if you want to see results with your personal finances, waiting until 2025 would be a wasted opportunity.
Meaningful changes that could have a major impact on your long-term goals can start today. Here are 10 New Year’s financial resolutions to get started on now before the calendar turns, regardless of your income level or net worth.
Eliminate Credit Card Debt
Getting rid of dragging balances on your credit cards is at the top of the list. Credit card interest rates have been climbing in the last few years, and I’m not expecting lower interest rates anytime in the near future.
As of the writing of this post, the average credit card interest rate reported by Bankrate is 20.39%. Any interest paid on credit card debt is a lost opportunity for financial growth.
It may seem like credit card debt is only something people struggle with when they’re first starting out or having trouble making ends meet. But lifestyle creep often comes alongside financial success, and we find that even high-net-worth individuals often have looming balances from month to month.
I highly recommend that you make it the focus of your finances to tighten up your budget if you can’t pay off your card balances every month and focus on eliminating your credit card debt quickly.
Maintain Positive Cash Flow
This one should go without saying, but maintaining positive cash flow and having leftover money at the end of the month is crucial for meeting your financial goals. But like I mentioned above, lifestyle creep and not keeping a close eye on your spending, regardless of your income level, can seriously threaten your progress.
But when you have a decent amount left, that's when the magic happens. You can split up your excess cash among different goals or focus on the most important one you have in mind.
The simplest way to assess your cash flow and spending habits is by looking at leftover funds in your checking account after paying all your bills and monthly expenses, and then making a plan for how those dollars can supercharge your goals.
Our helpful and free Cash Flow Worksheet is a great place to start and will help you categorize your income and expenses to get a better understanding of your financial well-being.
Earn Better Interest on Your Savings
Having an emergency fund is foundational for healthy finances. Generally, you want to keep between three to six months of expenses set aside safe and sound for emergencies. Find the number that is right for your situation.
If you are a dual-income household with jobs in different industries, you might feel comfortable setting aside three months of expenses as emergency savings. But if you are a single-income household, I recommend being conservative and shooting for at least enough to cover your living expenses for six months if unexpected job loss or another type of emergency arises.
Regular savings accounts pay you a ridiculously low interest rate. Instead, I recommend opening a high-yield savings account, currently paying above 4% interest rate on your savings.
Although you won’t get rich from the returns of your high-yield savings, the hope is that you can at least earn enough to fend off inflation while keeping your cash secure.
Invest Excess Cash
Although I love a healthy emergency fund, overfunding your high-yield savings account could lead to missed opportunities.
Cash above your three to six months of expenses could yield better long-term results in an investment account. So, if you have excess cash and no plans to make large purchases in the short-term, there's an opportunity to explore.
Funds you don't need for large purchases in the next three to five years could yield better returns invested in a diversified portfolio, if you have the flexibility and the time to wait.
Maximize Retirement Contributions
Are you on pace to maximize contributions to your employer's retirement plan? Contributing the maximum to your retirement accounts, if you can afford it, could help amplify the results of your future nest egg.
In 2024, employees can contribute $23,000 to their 401(k), or $30,500 for those age 50+ thanks to annual catch-up contributions. So, this is a good time to check on your year-to-date 401(k) contributions to avoid missed opportunities.
High-income earners can consider strategies like the Mega Backdoor Roth to supercharge retirement savings as well. In addition, anybody with earned income can fund a Traditional IRA or Roth IRA (depending on income limits) for $7,000 or $8,000 for those age 50+.
Review Your RSU Vesting Schedule
If you receive compensation via restricted stock units, or RSUs, this is also the time to review your vesting schedule. We recommend making a purposeful strategy for what to do with those grants so they can support your overall growth and net worth goals.
Diversifying out of your restricted stock as your grants vest can help reduce your risk exposure and make funds available to pursue financial goals on your wish list. If you do nothing after your restricted stocks vest, you might end up with a heavy concentration of individual company stock which could increase your risk exposure.
Accumulating RSUs can also result in a complex tax situation when deciding to sell and generating capital gains. Blackout trading windows can also make it difficult for you to sell RSUs if you need to turn them into cash in a pinch.
Our general recommendation for employees receiving complex equity compensation is to partner with a trusted financial advisor to make sure you’re maximizing your opportunities. Learn more about our comprehensive wealth management services here.
Maximize Your ESPP With a Proactive Strategy
Participating in your employer's stock purchase plan, or ESPP, can be an easy way to grow your money, especially if your program offers a 15% discount and a look-back period.
However, participating without a strategy in place can also set you up for added risk exposure, cash flow issues, and a complex tax filing season when you decide to sell.
If you are not maximizing your contributions to your ESPP plan, take a look at your budget and cash flow to find out if you can increase your participation.
If you are new to your ESPP plan, a good strategy is to proactively sell your shares right after each purchase. This way you minimize or avoid having a capital gain, and you can reinvest the proceeds in a diversified portfolio to better manage your risk exposure.
You can also apply the proceeds of your ESPP sale towards other financial goals you are working on. If you have been participating in your company's ESPP program for a while, you can implement this strategy going forward but will need to carefully review old purchases to minimize your tax liability when you are ready to sell.
Our free ESPP calculator is a great place to start.
Find a Professional to Tackle Your Taxes
One of the biggest mistakes people make is to wait until the new year to look for a certified public accountant (CPA) or tax advisor. Good luck getting a call back amid the tax season!
Instead, ask friends and colleagues now for referrals and reach out to start interviewing potential candidates as soon as possible. The expertise of a good CPA or tax advisor could save you money on your taxes and headaches dealing with errors when filing tax returns.
Review Your Credit Report
When was the last time you reviewed your credit report? If you can't remember, then it is time to do it now.
Being aware of what is being reported to the credit bureaus can help you stay on top of potential risks of identity theft and credit reporting mistakes. You are entitled to a free copy of your credit report once a year from each of the three credit reporting companies, TransUnion, Equifax, and Experian.
If your personal information has been subject to a data leak or breach, and let's be honest, whose hasn't, then reviewing your credit report and credit score frequently is critical. You can pull your reports at once from the three companies, or spread it every trimester to make sure no strange financial accounts are showing up in your record.
In addition, you can consider activating a credit freeze as a security measure to block potential identity thieves from using your personal information to open accounts on your behalf, especially if you have been notified of being involved in a data leak.
Give Your Financial Plan a 2-Minute Gut Check
The first step in building a goal-focused financial plan is getting the lay of the land and understanding how you’re doing so far when it comes to your overall financial health.
If you think your financial plan may be missing something, our 2-minute financial analysis is a great place to start. You’ll receive instant results in four key areas of your financial situation, along with personalized recommendations and curated resources to make a major impact on your plan moving forward.
