New Year’s resolution to save money? Here is how to do it

Eat more healthfully. Work out three times a week. Log more time with books and less time with screens.

The beginning of the year is a popular time for individuals to reassess their goals and make strides toward improving themselves. People set “resolutions” to motivate themselves to create and maintain healthy habits. The goal is for those habits to stick and become part of a long-term healthy lifestyle.

Resolutions are also excellent opportunities to look at your financial health. New Year’s resolutions generally include small steps to reach bigger goals. This is the reason financial goals work so well as resolutions. By implementing small changes to your savings habits throughout the year, you can see a major impact on your finances by the end of 2021.

Below are practical money-saving tips to help you act on your New Years’ financial resolutions — as well as strategies to help support those resolutions. Small changes, such as looking for discounts and tracking your expenses, will add up over time.

1. Outline specific goals

It is imperative not only that you put your New Year’s resolution to save money down on paper (or your smartphone or another device), but also that you are as specific as possible. Just saying you want to pay down your credit card and bolster your savings is not enough. Put numbers to your New Year’s resolution ideas whenever you can. How much will you pay down your credit card? What balance will be in your savings account? Add dollar amounts to your New Year’s money goals wherever possible to make it measurable.

2. Set up an emergency fund

Everyone knows they should have an emergency fund, but it is not always easy to set aside three to six months’ worth of expenses. As 2020 showed us, things can happen unexpectedly in life. You will be glad to have the emergency savings fund set aside if you or your partner loses a job or if you have an unexpected bill for your home, vehicle, or health. Using the money in a more liquid emergency savings fund will help you to avoid going into debt, pulling from an investment account, or using money that was set aside for other financial goals.

3. Focus on your credit score

Your credit score is essentially your financial report card. It plays a major role in what types of loans you can get, as well as your insurance and interest rates. There are many ways to improve your credit score, including paying bills on time, monitoring your credit score, and making routine purchases on a long-standing credit card. If you make improving your credit score a resolution, decide on several small steps to take throughout the year.

4. Hold yourself to a budget

Good budgeting requires discipline. You have to be able to resist the temptation to spend recklessly or splurge on items that do not fit your budget goals. Try giving yourself reminders of your goals throughout the year, whether it’s a photo on your fridge of a big purchase, a calendar reminder, or a small reward (more on that below). Then, revisit your progress throughout the year to make sure you’re on track. If you don’t have a budget, now is the time to make one.

5. Create a rewards system

Just as you might incentivize a child with a reward for a small task, you can motivate yourself with a similar system. If you are struggling with how to start saving money or taking steps to pay down debt, this is a great way to get started. As you set progress benchmarks, incorporate rewards for yourself such as a night to relax, a mini weekend vacation, dining at your favorite restaurant, hiking a gorgeous trail, etc. Make sure to choose attractive enough rewards that you will actually hold yourself accountable to your financial goals.

6. Educate yourself on financial topics

A perk of today’s virtual learning environment is that you can learn almost anything you want if you have internet access. Whether you prefer videos, podcasts, blogs, or whitepapers, there is plenty of content available to help you expand your knowledge on financial topics. If you prefer a good old-fashioned book, there is an abundance of those, too. For further education, sign up for a course or talk to a financial advisor.

The New Year is a great time to focus on your financial goals. But long-term habit change is hard, and it takes a long time to achieve financial security. Do not expect results overnight. Give yourself a grace period as you adjust to your new money-conscious lifestyle, and over time you will begin to see the results of your commitment.

Ready to make 2021 your year of wealth? Contact a Cathay Wealth Management financial advisor to discuss how we can help you reach your goals.