You can usually guess someone’s New Year’s resolution because it often involves losing weight, getting into better shape or cooking more nutritious meals.
Look, we’re not trying to throw shade. If those are your goals, they’re impressive. Drop those pounds, build that muscle, try kelp — we’re with you.
But beyond getting healthier, what about getting wealthier? Every January, many people focus on their bodies but tend to overlook their financial fitness. Financial fitness is a thing, and guess what? Having extra cash will make you feel just as sexy and confident as whittling your waistline. Get after these four New Year’s resolutions to start off 2021 with money on your mind.
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1. Track your spending
Even if the days of panicking about overdrawing on your cash management account are behind you, it’s worth paying attention to exactly how much you spend. Why?
“Understanding exactly how much you’re spending helps you appreciate how much you’re able to save. Your savings rate is the most important component for determining your ability to accomplish financial goals like home ownership, starting your own business or being able to retire,” says Lauren Anastasio a financial planner at SoFi. “Reviewing your transactions can be one of the easiest ways to find opportunities to save money.”
Tracking your spending may sound hard, but there are free online tools that make it easy.
“It gives you an up-to-date, real-time snapshot of your finances,” Song adds.
2. Create a budget
Budgeting takes a little time and effort, and it’s not always fun to face reality (like the fact that those Bruno Mars floor tickets uptown funked-up your credit card bill). But over time, it can help you feel calmer and more in control. The key is analyzing your “fixed” expenses (think: rent/mortgage, car payment, utilities, childcare) versus your “discretionary” expenses (think: restaurants, clothing, entertainment).
“The general vibe I get is: When people have more than 50% fixed expenses and less than 50% discretionary expenses, they feel like they’re just working to pay bills. They feel that pressure,” Song says. “When it’s the opposite, 30% to 40% fixed and 60% to 70% discretionary, those people have room to proactively reduce discretionary spending so they can save more toward their goals.”
So how do you get there?
First, see if you have any weaknesses in discretionary areas. Did you go way overboard on new outfits out last month? Consider giving yourself a spending limit in that category for next month. Then look at your fixed expenses.
“If you see a personal trainer and you don’t have a lot of time, they will have you focus on the major muscle groups. The same is true with your finances,” Song says. In other words, occasionally cutting out a $4 latte won’t make a major dent, so look at the big-picture items.
Can you live somewhere else to lower your rent or mortgage? Can you cut back from two cars to one, buy a cheaper car or combine car insurance with your partner? Can you walk or bike to work instead of taking a bus, subway or train?
3. Evaluate Your debt
Let’s bust a common money myth right now. Is all debt bad? Nope!
Just like there are heroes and villains in Wonder Woman, there’s good debt and bad debt. A mortgage, for example, is often good because the interest rate is generally low (in today’s rate environment) and a home is an investment that may, hopefully, earn you money over time. Similar principles apply to student loans.
Credit card debt, on the other hand, is often bad. It typically carries a higher interest rate and can sink your credit score, which can make it harder to do things like buying a home.
So channel your inner superhero, grab your magic lasso and make a plan to deal with that bad debt, whether it’s paying it off ASAP or refinancing it. If you’re aggressively trying to pay off your “good” debt, think about whether that’s really the best use of your funds, or if you might be better off saving or investing for some of your other financial goals, like buying a home someday.
4. Set yourself up for success
If you know that you should save more but you’re like, “I’m up to my eyeballs in student loans, I’m trying to buy a house, and my retirement portfolio is sadder than the latest album by The National,” we hear you.
Even if you’re not ready to save more right now, consider opening some savings or investment accounts anyway. “It’s about having the infrastructure in place. If you build it, they will come,” says Song.
This way, if you get a surprise gift, bonus or class-action settlement, you can throw it into one of these buckets instead of your checking account. Consider automating a monthly payment—even if it’s just $10—to each account because you probably won’t notice a difference, it’ll get you into the habit, and you may feel motivated to increase the amounts once you see the money grow.
Learn more:
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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SoFi Invest
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA/ SIPC. SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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5 ways to rebuild your retirement savings
Life happens. A natural disaster, an emergency surgery, a roof leak — all sorts of sudden, unexpected situations could leave you scrambling for funds and needing to dig into your retirement fund. If you’ve lost your life savings or discovered you aren’t on track to have the money you’ll need for the retirement you desire, then we’ve created this post for you!
As a bonus tip, it might help to visualize what you want your retirement years to be like. Do you imagine traveling the world? Relocating to a place where it’s sunny and warm — or where you’ll be near friends and family? No matter what appeals to you, keeping your unique vision front of mind could serve as a guiding light as you develop the strategy to rebuild your retirement savings.
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In the busyness of life, it can be easy to get into the set-it-and-forget-it mode of thinking. You might not have started saving for retirement yet, or you may have created a budget that has worked okay for you in the past and you haven’t made any changes. If that sounds familiar, then you may be pleasantly surprised by the possibilities.
Could you, for example, consolidate your credit card balances into a personal loan ? If so, how much would you save? If you took that amount and put it into your retirement account, more money could be going toward investing in your own future.
Are you paying off student loans or helping your child to do so? Again, refinancing might free up cash flow that could go into retirement savings.
What apps, subscriptions and the like could you live without — ones you might not even use anymore? In total, how much more could you invest in your own retirement each month or year? What might be the cumulative effect of all of your budget-cutting strategies?
As a related strategy, are you close to paying off a large purchase? This could include a boat, an RV, or even your home. If so, you could consider earmarking whatever you’ve been paying monthly for that large purchase to go into your retirement account. If it doesn’t seem possible to commit the entire amount each month to your retirement savings, what percentage might seem doable?
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If you have a 401(k) or other employer-sponsored retirement plan, you are allowed to invest up to $19,000 of your pre-tax salary annually, a cap that the IRS says may be increased in the future because of cost of living increases. Then, when you reach the age of 50, your annual contribution limit is boosted to $25,000. Increasing your retirement contributions also reduces the amount of your income that’s taxable.
If you’re contributing to an IRA, you can contribute $6,000 annually, or $7,000 if you’re 50 or older. This is true for both traditional and Roth IRAs. Note that, if you have an employer-sponsored 401(k), you can also invest in an IRA.
And, if you reach the limits of your retirement plans with tax advantages in a particular year, you could still continue to build up your reserves with other forms of investments, whether stocks, bonds, mutual funds, or something else.
In other words, you wouldn’t have to let the limits set by the IRS stop you from investing if you have funds available for that purpose. You might just need to invest another way until the next year’s retirement-investment opportunity returns.
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Ideally, yes, your hard work would automatically be recognized and your boss would give you a raise without you needing to ask. But, it doesn’t always work that way — and SoFi has created the ultimate guide on how to get a raise.
Highlights of the guide include:
• Being clear about what you deserve in compensation. It might help define your value by researching what other professionals with your skills, experience, and education are receiving.
• Gathering facts. This could include the financial information we’ve mentioned, plus your accomplishments, what others value about your work, and what you plan to contribute to the company going forward.
• Building up your confidence. It might help to practice your pitch for a raise with trusted friends and colleagues.
• Making an appointment. You might want to set a time to give your data-based, professionally expressed, well-timed request for a raise.
Then, you could invest any raise (or bonuses) into your retirement savings.
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If you were born in 1960 or beyond, then your full retirement age for Social Security benefits, according to the IRS, is 67. There are also delayed retirement credits that you can take advantage of. In this scenario, you could earn 124% of your monthly benefit if you delay retirement until the age of 70 — a delay of 36 months.
You may decide that, yes, you’re going to keep working in your current career until the age of 70. Or, you could switch to an encore career, one that brings about a change of pace for you and allows you to focus on a specific passion, one that might offer more freedom and aligns with values you hold dear.
It could involve consulting or freelancing, or otherwise using skills, contacts and experiences in a new way, possibly even telecommuting or working a more non-traditional schedule.
This might help increase Social Security benefits while working in an exciting new career. You could also use some of your earnings to invest in retirement savings.
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It might help to review your retirement portfolio to determine if you’re investing in the best way, with “best” defined differently for each person. Each person has their own risk tolerance, and each person’s financial situation is unique.Your portfolio review might take those factors into account.
Perhaps you also have a wealth account, an investment vehicle where you contribute after-tax funds. If so, it might make sense to review that portfolio, as well, to determine if you may be able to accelerate growth.
As you look at your portfolio, would it become even more meaningful if you focused on active and automated investing platforms that could help you as an investor without paying fees.
Learn more:
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Invest
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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