Holiday spending emotions are real and can lead to unrealistic resolutions. That’s why it’s important to have realistic New Year resolutions for 2022.
There are many smart money decisions you need to make and tick off these pointers from your year-end financial checklist. While you can learn how to make 2022 your best financial year yet, here’s how you can deal with expectations and how to keep your resolutions for the New Year realistic.
Unrealistic expectation: Swearing debt this year
Instead: Build an emergency fund first
Before you focus on paying off debt, know that it’s more urgent to have an emergency savings account. Why? An emergency savings fund is what will help you survive financial hardship while keeping you from accruing even more debt.
Keep your emergency savings in a high-yield savings account that is easily accessible during emergencies. One month of emergency savings is the bare minimum, but otherwise generally aim to save at least three months’ worth of living expenses.
If you already have an emergency fund, peek into the interest rates on your debts. “If you have debts with interest rates above 4%, prioritize paying it off. Else use that money for other investments and retirement.
Unrealistic expectation: Financial resolutions that are vague
Instead: Have a financial game plan
Break down a large goal into bite-sized goals with shorter deadlines. Maybe start with a six-month-milestones to track your progress. Once your steps are measurable and specific towards your large goal, it’s easier to keep the momentum.
Instead of saying, “I’m going to save a specific amount, say $100.000, for retirement,” say “I will crease my 401(k) contribution by 10% this coming year. You can break down the amount to how much you want to contribute every month or every quarter.
Unrealistic expectation: Starting resolutions on January 1
Instead: Walk into the New Year with a solid plan in place
Remember, that there’s no automatic switch that goes off at 12 AM on January 1 that will magically change your behavior. Building new habits take time and planning.
Set the last few days of 2021 aside and review your finances. Then jot down a specific and solid plan for the New Year. Ask yourself some difficult questions like:
- Do I bring in more cash than I’m spending?
- Am I spending too much money on my credit card then relying on the year-end bonus to pay them off?
- Does my year-end have more debt than I started with?
- Can I cut out some unnecessary monthly subscriptions?
- Am I on track to meet my retirement goals?
Unrealistic expectation: Excluding relationships from your money goals
Instead: Align your goals with your partner’s
Partners are two individuals with different goals. Sometimes, one partner wants to save up for a house and the other wants to save for retirement, so best to sit down before the beginning of the year and see how you can both prioritize goals together.
During the end-of-the-year reviews of your finances, as a couple, ask each other the following questions to be clear on new year goals and make realistic resolutions on your resolution.
- How do you feel about our finances this year?
- Did we contribute equally to household spending?
- Did our credit score change this year?
- Are we on the same page and track about our retirement goals?
- Keep your resolutions specific not vague. Vague resolutions won’t go beyond February 1. Take it from us.
