As the holidays approach and another year comes to a close, it’s time to start thinking about the New Year’s resolutions we can make once the calendar turns to 2017.
That usually involves ruminating on all the resolutions we promised to keep this same time last year, yet somehow failed to follow through on. Then there are the ones that got off to an optimistic start before ultimately losing momentum. And the numbers still stand: a very small percentage of us fully realize and accomplish the resolutions we initially set out to make.
It’s understandable; prioritizing can become a challenge, or life just somehow gets in the way, so resolutions fall by the wayside. How do you not repeat the same pattern this year? One way to motivate yourself this approaching year is to make changes that benefit not just yourself, but your family, kids and loved ones.
And when it comes down to improving your finances, that means making small resolutions with the big picture in focus. Keep some of these tips in mind to get started.
Get your house in order
Financially speaking, that is. Just like setting up an education fund for your children, other types of financial planning involve making resolutions today to plan for tomorrow. One goal for 2017 is to kickstart your estate planning process: devising a will, organizing your assets and investments, naming beneficiaries and executors, and mapping out end-of-life arrangements.
Of course, you should still aim to aggressively tackle saving for retirement, which can be a challenge if you’re still budgeting for the day-to-day and wondering how to choose between your financial future and that of your family. At the start of the year, perhaps your first resolution-based move should be checking in with your employer to take advantage of company 401(k) or stock/investment options. Open a Roth IRA or start increasing contributions to your existing account; at $5,500, 2017 annual contribution limits are the same as 2016.
And it goes without saying that no future planning for your family would be complete without seriously considering some kind of life insurance policy to ensure your survivors are financially set. Our comprehensive life insurance guide helps you get started on this.
Examine your finances
If your resolution last year was to save more money or cut back on spending but you never really got a solid plan in place, that doesn’t mean you made zero financial progress. If you have a budget in place, start examining your expenses throughout this past year to see which months you saved more than spent, and take note as to what you did to make that happen. If not, that’s OK; one place to start is by looking at your bank statements from this year to spot where you’ve tended to spend more than you’d like. (You can also ask your bank or credit card provider to prepare a simple expense report to track your spending the last few months.)
"You can’t begin to make improvements until you have your problem areas clearly defined," said Craig Bolanos, CEO of the Wealth Management Group in Chicago. Bolanos suggests families prepare a balance sheet to help their households best determine how to focus on assets and liabilities. If you have no budget in place, there’s no better resolution than to start one and get a better handle on your income, expenses and debt.
Change your money mindset
Failing to fulfill a resolution is to fail ourselves. Most of it is rooted in excuse-driven thinking and ill-informed behaviors that prevent us from gaining a new, healthier perspective on what we’d like to change so we can actually go ahead and make the change. Personal finances are no different. When we make excuses, it could be on account of a lack of financial literacy: an accurate knowledge of how money works, and how to better put that know-how into motion in our daily lives.
So if there’s only one resolution you make (though you should make several), remember that less can mean more. Less credit card spending means more chance at staying out of debt; less spending on unnecessary purchases (like eating out) means more money to save.
Think about what you’d like to save for (college tuition, having more children, upgrading to a new home) and consider how many months or years you and your partner would need to save up. Once you’ve determined how your money is being spent plus how it should be spent, start setting goals in tandem with a more focused, positive outlook.
Any good resolution, like starting a diet or a workout regime, will only work if short-term planning dovetails into a long-term outcome. Making small changes to your behavior are more sustainable in the long run -- something you and your finances can benefit from.
Save ahead for education
Resolutions don’t always need to produce an effect that can be seen immediately. Saving and investing, for one, is a goal that takes effort and time before you can start to see results. One financial resolution with your family’s benefit in mind is to start investing money for your children’s college education.
It’s a 2017 resolution for personal finance blogger David Bakke. "I plan on beginning a 529 college savings program for my son so he isn't saddled with student loan debt when he finishes college," Bakke said.
Like IRAs and 401(k)s, 529 accounts allow you to make regular deposits tax-free, but don’t stop there. We’ve previously noted on our blog that you may be able to obtain an additional tax deduction on your 529 plan depending on the state you live in -- and, if you front five years of contributions all at once (max $70,000), you can avoid a gift tax. With the average in-state public college tuition passing $24,000 per school year, it helps to save ahead of the game, since college costs are expected to increase exponentially in the following years and decades.
Make resolutions a family effort
Research shows that more than three-quarters of parents aren’t always truthful or forthcoming when telling their kids about money matters -- not to mention that our bad money habits may be a bad influence on them (and ourselves).
Make financial planning a family endeavor. Find opportunities to teach your kids about saving money, spending less and the value of earning compound interest; teaching them about these basic money concepts can help give you the clarity you need to focus on your family’s finances for the New Year.
"Raising financially savvy children is a very tall task in today's climate," Bolanos said. "Creating awareness over the concept of paying oneself first [saving] proves to be a very valuable life lesson and skill."
Make this the year to be transparent. Start talking to your family about finances and get them involved in household budgeting. One resolution could simply be to download your choice of financial/budgeting apps to sync up each member of the family; then, they can participate in saving, spending and dividing up responsibility for the family budget. By getting everyone in the household involved, aiming for family-level accountability in a New Year’s financial resolution can prove to be stronger than any goal you’d have set just for yourself.
These are only just a few resolutions to get you thinking for the rest of 2016. What are some financial resolutions and changes you’d like to make in the New Year? Leave them in the comments below.