Most Common Financial New Year's Resolutions

Terry Herr, CFP®

As the New Year rolls around, now is the perfect time to take stock of your current financial health and set goals for the upcoming year. Financial New Year’s resolutions are a great way to take control of your finances, build wealth, and develop healthier money habits.

What are the most common financial New Year's resolutions? Here are some tips to help you achieve them.

1. Save More Money

One of the most common financial resolutions is to save more money. Whether it’s building an emergency fund, saving for a home, or setting aside money for future vacations, saving is often at the top of people's lists. However, daily expenses can quickly sideline this resolution without a clear plan.

Here’s how to set yourself up for success if your goal is to save more money:

• Set Specific Goals: Determine exactly how much you want to save and by when. For example, instead of saying, "I want to save more money," say, "I want to save $5,000 by the end of the year."
• Automate Your Savings: Set up automatic transfers from your checking account to your savings account. This makes saving a habit and removes the temptation to spend that money elsewhere. There are also apps you can download that automatically take money from your checking account and put it in your savings account as a true “set it and forget it” solution.
• Cut Back on Unnecessary Expenses: Review your monthly expenses to identify areas for savings. Cutting back on your expenses means you’ll have more cash flow to save.

2. Pay Off Debt

Debt reduction is another top financial resolution. There are two main strategies for paying off debt. Choose the one that works for you and your situation.

Debt Avalanche Method

The debt avalanche method involves paying off the debt with the highest interest rate first (such as credit card debt).¹ This will save you money in the long run, as you’ll pay less interest.

Debt Snowball Method

The Debt snowball method involves paying off your smallest debts first while making minimum payments on larger ones.² As each small debt is paid off, the money can be applied to the next debt.

In addition to choosing a debt repayment method, set realistic monthly repayment goals and stick to them. Even small additional payments can make a big difference over time.

3. Create and Stick to a Budget

Many people set a goal to create and stick to a budget to gain better control over their finances. Budgeting helps you track where your money is going and ensures you’re living within your means. However, sticking to a budget can be tricky, especially if unexpected expenses arise. Here are some specific tips to help:

• Use Budgeting Tools: Plenty of apps, like Mint, YNAB (You Need A Budget), or even simple spreadsheets, can help you track your income and expenses. These tools make it easier to manage your budget and stay on top of your spending.
• Set Realistic Limits: Be realistic about your expenses. Allocate funds for fun and entertainment to avoid burnout, but don’t let those expenses derail your budget.
• Review Your Budget Regularly: Life circumstances change, and so should your budget. Revisit your budget at least every quarter to ensure it’s still working for you, and adjust it as necessary.

4. Invest for the Future

Another popular resolution is investing for long-term financial goals, such as retirement. However, many people don’t know where to start. But even starting small and gradually building an investment portfolio is a step in the right direction. Here are some tips to help:

• Start Small: You don’t need much money to start investing. Many brokerage accounts allow you to start with as little as $100.
• Contribute to Retirement Accounts: Maximize contributions to retirement accounts like a 401(k) or an IRA. If your employer offers a 401(k) match, take full advantage of it (their match is pretty much free money!).
• Diversify Your Investments: Don’t put all your eggs in one basket to reduce risk. Spread your investments across different asset classes, such as stocks, bonds, and mutual funds.

5. Build an Emergency Fund

Building an emergency fund is a tremendous financial New Year’s resolution. Most financial experts recommend saving 3-6 months of expenses, depending on your lifestyle.³ This emergency fund can be used for unforeseen expenses, such as a sudden illness or accident, an unexpected job loss, or a surprise home or car repair.

Here are some tips to help you get specific and achieve your goal of building an emergency fund:

• Start Small and Build Over Time: If you can’t save three to six months’ expenses immediately, start by aiming for one month’s worth. Gradually increase your savings over time.
• Open a Separate Account: Keep your emergency fund separate from your regular checking or savings account to avoid dipping into it for non-emergencies.
• Direct Part of Your Income to the Fund: Set up automatic transfers so a portion of your paycheck goes directly into your emergency fund. Treat it like a regular bill.

Setting financial resolutions is a great way to start the year, but sticking to them is the real challenge. With a clear, specific plan, you can achieve your financial New Year’s resolutions. Whether it’s paying off debt, saving more, or investing for the future, your 2025 financial goals are within reach!

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