Happy New Year!
As we enter a new year, we have an excellent opportunity to set constructive goals that can help us bring order to our lives, spark our creativity, and focus on what truly matters. One crucial area we often look to improve is our financial health.
January is National Financial Wellness Month, and it's the perfect time to evaluate your finances and prioritize your financial well-being, especially after the busy and expensive holiday season. Celebrating National Finacial Wellness Month can be an empowering and enjoyable journey toward greater financial stability. Here are some proactive steps to set yourself up for success in 2025.
Be all in. Start by examining your current attitude toward money. Then, reflect on your financial habits and identify areas for improvement. By identifying your strengths and weaknesses, you can develop a clear plan for improvement. Additionally, focus on at least one specific benefit you wish to achieve, such as greater control over your day-to-day spending or reducing stress.
Create a budget and take a detailed look at your spending patterns. Developing a monthly budget is the foundation for gaining control over your finances. A budget not only improves your spending habits but also helps you track your finances and avoid accumulating debt. Additionally, a budget provides a clear picture of your financial situation and will empower you to make informed choices.
If you have not mastered paying off your credit card balance in full each month, consider using cash versus credit. By limiting yourself to cash, you inherently create a budget for each expenditure. Once the money is spent, it's gone! Studies suggest that people spend about 15% more when using credit cards, so to minimize impulsive purchases, consider leaving the credit cards at home. However, if or when you have mastered paying off your credit card statement balance in full each month, use a cash-back credit card for most purchases. In addition to earning cash back, points, or miles, many credit cards offer purchase protection, warranty protection, and even travel insurance. Additionally, unlike when using a debit card, if your credit card number is lost or stolen, it is easier to dispute unauthorized charges and get a new card mailed to you quickly. Whereas, your debit card is directly tied to your checking account, so your financial institution could freeze your funds while they investigate the unauthorized charges.
Negotiate your bills. Contact your internet, cell phone, and service providers and request better rates. Begin by researching competitive prices in your area and use this information to your advantage when securing a favorable rate. As an extra measure, when contacting customer service, ask to speak with a representative from the retention department for the best chance of securing a better rate.
Set financial goals. Establishing clear goals is vital for shaping your financial wellness, and setting specific objectives empowers you to focus on what you want to achieve. Achieving your financial goals will differ in length and time, so each goal should have a specific purpose, a dollar amount it will cost, and a realistic target date to achieve that goal.
Short-term goals are priorities achieved within two years, such as planning a vacation or wedding or saving for a car down payment.
Mid-term goals are achieved in two to five years. Some examples include saving for a down payment on a house or paying off a sizeable student loan.
Long-term goals are priorities that take over five years to achieve, such as saving for a college education or retirement.
Start an Emergency Savings Fund. The past few years have highlighted the importance of being prepared for the unexpected. An emergency fund can protect you from the financial strain caused by unforeseen events such as a job loss or illness. You can keep a minor financial setback from turning into a major crisis when you prepare for the unexpected by having an emergency savings fund. Aim to save at least three to six months’ worth of living expenses in a high-yield savings account, which allows you to earn interest while keeping funds accessible. Then, gradually increase your savings to cover up to twelve months’ expenses or to cover an amount tailored to your specific circumstances.
Work on reducing debt. Start by looking at your current financial obligations and obtaining free copies of your credit reports at www.annualcreditreport.com. There are several different effective strategies you can use when paying down debt:
Pay the lowest value balance first.
Pay the highest interest debt first.
Consolidate your debt.
Pay more than the minimum amount due.
Cut spending elsewhere and use the surplus towards the debt. You can choose one or use a combination of approaches to pay down your debt. Paying extra above the minimum due amount is the key to eliminating your debt faster.
Take advantage of your employer’s financial benefit packages. If your employer offers a workplace retirement plan, such as a 401k, take advantage of the 'free' matching dollars they provide as a plan participant. Also, review your current portfolio fund lineup, including performance and fees, to see if you're utilizing the best options. If you feel overwhelmed, you could even have access to a financial advisor through your employer. Their expertise can provide valuable insights personalized to your unique situation. In addition to your workplace retirement plan, your employer may offer a program that addresses broader financial wellness, such as student loan management or a wellness benefits stipend. This year look beyond your paycheck and ensure you are making the most of your compensation package.
Have an accountability partner. Staying focused and on track will be much easier when you get a family member or friend to help hold you accountable. Also, asking them to participate in tracking their finances will keep you motivated because you'll be working as a team.
Evaluate your finances regularly and be patient. Set aside time to assess your progress toward your goals. This time of reflection will allow you to make necessary adjustments and stay aligned with your objectives. Just like training to run a marathon, getting your finances in order takes passion, energy, focus, work, and time. However, by embracing these constructive steps, you'll be well on your way to enhancing your financial wellness in 2025.
Here's to a fresh start and the opportunity to create an incredible year ahead! You’ve got this!
God Bless,
Livia
aka Livia Kelly (Author)
Livia Kelly is the Author of Unmarried and Debt-Free. Her book has made Amazon's #1 Best Seller list in Personal Budgeting and Two-Hour Self-Help Short Reads. Livia combines personal experience with research and is passionate about sharing personal finance advice with others. She provides valuable insights on budgeting, saving, and tackling debt while empowering her readers to take control of their financial journey. More information can be found at https://www.liviakellyauthor.com. Follow Livia on Facebook and Instagram @liviakellyauthor.
📸 Credits: Agustin Vai for Getty Images and Nicole Tyler