The fresh-start effect can be wonderful. As the new year approaches, you may think about the resolutions you want to set, including improving your finances. But, like many resolutions, it’s important to consider how you’ll keep yourself motivated as that fresh-start effect wears off.
“Check in regularly,” says Ismat Mangla, LendingTree senior director of content. “Don’t set a resolution in January and forget about it until November. If you have a spouse, make a monthly check-in date to review your finances and see where you stand. Or put a reminder on your calendar to check in regularly and track progress.”
With that in mind, here are four financial resolutions to consider.
No. 1: Tackle your high-interest debt
“With interest rates soaring, now is a great time to focus on paying down high-interest debt, like credit card balances,” Mangla says.
The first step is determining how much you owe and scrutinizing your various interest rates. Then you can consider which payoff strategy feels the most comfortable for you to start chipping away at that debt.
“You may consider the snowball method, which means paying off the smallest balances first,” Mangla says. “Perhaps your goal is to pay down your three smallest balances by a certain date. Another option is the avalanche method, which entails paying off the debt with the highest interest rates first. You can use a credit card interest calculator to determine how long it’ll take to get down to zero, and then make paying that amount down your specific goal for the new year.”
No. 2: Set small, specific savings goals
Another way you could implement this type of goal is to set up sinking funds. These are savings accounts you plan on regularly tapping for expenses that don’t happen every month. (Think: car maintenance or annual subscriptions.) Dividing those costs over a year can help give you some financial stability in your budget.
Either way, timing auto-transfers with (or after) paychecks can be extremely helpful since you wouldn’t have to worry about letting the goal fall to the wayside or paying overdraft fees.
No. 3: Increase your credit score
Credit is the gateway to a lot of important financial tools and opportunities. Raising your score can help if you have multiyear goals, like buying a house. The key is to know what steps will have the most impact.
For example, FICO weighs payment history (35%) and amounts owed (30%) more heavily than your length of credit history (15%), credit mix (10%), and new credit inquiries (10%). Focusing on those first two factors — by setting up autopay for your various debts and payments and lowering your credit utilization — is almost certain to be better for your credit score.
No. 4: Talk to a financial professional
If you feel you don’t know what goals would most benefit you, a professional’s opinion could help.
Another plus is that, unlike many financial goals that require long-term strategies, setting a single meeting is quick, attainable and specific. That could provide the boost you need to make it through the year.
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