Many well-intentioned people enter the new year armed with multiple financial goals, but struggle to meet them. Some simple tweaks to these resolutions could make all the difference in 2021, according to MoneyRates.com.
The personal finance site polled 3,000 people, a majority of whom listed their financial priorities as save more, spend less and reduce debt.
The survey found that 61% of respondents intend to save more in the next 12 months. This is a pressing issue for those 55 or older — but saving large sums of money becomes more difficult after age 50, Money Rates noted.
Thirty-eight percent of respondents reported that creating a budget with a specific savings amount was their primary approach to saving, followed by setting up automatic deposits into savings accounts.
“It’s concerning that 28.1% of those who say they plan to save more don’t identify any specific steps for how they plan to do so,” Richard Barrington, MoneyRates’ senior financial analyst and spokesperson, said in a statement.
“On the positive side, over a third of people who intend to save more plan to start by creating a budget.”
Barrington said a budget is the most important step to boost savings, as it creates a specific savings goal but also ensures that more money is coming in than going out.
Getting Out of Debt
Fifty-four percent of survey respondents said they hope to reduce how much they owe in the year to come. They plan to do so by minimizing discretionary spending and increasing monthly payments.
This makes good sense, MoneyRates said, but suggested that there could be missing elements that create speed bumps to success.
It said having an emergency fund should be a top priority. An emergency fund can prevent people from turning to credit cards or loans for unexpected expenses. High yield savings accounts can be a good place to store the fund.
MoneyRates said it is also important to focus on lowering interest rates. Making minimum payments with a high-interest card barely chips away at new interest charges. Money stretches farther by using a balance transfer or 0% APR card, it said.
“Prioritizing debt so you pay down the highest interest debt fastest is the most cost-effective way to reduce debt,” Barrington said. “However you prioritize your payments, though, always make sure to meet the minimum monthly requirement for each debt.”
Saving for Retirement
One of the best ways to save for retirement is to spend less on other expenses, according to MoneyRates. This concept is on most people’s radar, the survey found.
Three in five respondents said they plan to spend less in 2021, mainly by creating and sticking to a budget in order to spend less.
Creating a budget outlines an exact strategy for where money is going and where cuts can be made, with excess money then funneled into a 401(k), IRA or other retirement account. To achieve this, however, it pays to be familiar with retirement planning concepts first, MoneyRates said.
It pointed to another recent survey, which showed that many Americans lack investor aptitude and do not know how to adequately manage retirement finances. A financial advisor can help devise the ideal plan.
Steps to Achieve Financial Resolutions
“Attaining financial resolutions is mainly a matter of getting organized,” Barrington said. “The process doesn’t have to be overwhelming if broken down into smaller steps.”
MoneyRates recommends these steps:
- Create a budget
- Build an emergency fund
- Open a savings account
- Start a debt snowball
- Get a balance transfer credit card of 0% APR credit card
- Talk to a financial advisor
- Check in throughout the year
Related: 6 New Year’s Investment Resolutions