Stuck on Financial Resolution? 3 Financial New Year Goals 2024
January is a time for goal-setting, and in personal finance, the ultimate financial goal is achieving fiscal freedom. Set the tone for a successful financial 2024 year by maintaining a budget, tracking progress, and sticking to your financial resolutions. Three key financial goals to consider are raising your credit score, establishing and building an emergency fund, and tackling high-interest debt. Let’s take a closer look at each of these goals and discover how to achieve each.
Raising Your Credit Score For Financial Wellness
Here at Boost Your Score, we know that increasing your credit score can do a lot for you, your family, and your ability to spend money and take out loans in the long run. For instance, your credit score is checked whenever you request a personal, auto, or home loan. Accepting student loans during your college years can also affect your credit score. You will need to be strategic about raising your score when it’s time to repay those loans (for more information on improving your credit score while dealing with student loan debt, visit our resources blog on the subject). Overall, a better credit score will help improve your financial health.
To improve your credit score in 2024, start by setting a specific and achievable goal. This may not necessarily be a particular credit score. Instead, try paying off a set amount of debt, acquiring a secured credit card, closing an account after full payment, or reaching a targeted credit utilization rate. Utilize a Credit Score calculator from platforms like myFICO, Credit Karma, or Experian to estimate how these financial goals may impact your credit score. Adjust your answers based on your goals this year to gauge potential effects.
Establishing a budget is crucial to achieve a higher credit score. Allocate a fixed amount from each paycheck to pay down debt and use a calendar to track due dates for all accounts. Regularly refer to the calendar to ensure timely payments. Consider setting up autopay for added convenience and consistency. Stay committed to your payment plans once you’ve outlined your credit score improvement tactics. Consistently paying your debts for 6 to 12 months is critical to meet your goals.
Create an Emergency Budget
An emergency fund is a certain amount of money you set aside that protects against unforeseen expenses if you cannot work or have significant costs that could not have been predicted (medical, automotive, home repairs, legal expenses, emergency travel). Generally, financial advisors recommend saving three to six months’ worth of living expenses as an emergency reserve. Does this seem like a lot? Fear not. For your emergency fund, it’s better to start saving where you’re at than to never try to save. Some recommend creating an initial financial goal of a small amount, such as $500. Others offer the alternative of setting aside one month’s expenses (this includes shelter, utilities, communication, transport, and food).
When you start building up your fund, remember that the most consistent additions to your emergency reserve will come from your paycheck. Budgeting your paycheck to allow you to set aside even a small amount of your money for emergencies is essential.
You may be riding high from an annual holiday bonus, but you should spend it in multiple places! When you receive a large sum of money either as a holiday gift or as a bonus from an employer, it is helpful to earmark a portion of that money for emergencies. By doing so, you are helping yourself achieve the goal faster.
After determining your plan for building an emergency reserve, it is helpful to consider strategies for keeping it accessible and secure. This involves choosing the correct type of account to put your money in. According to fidelity investments, the goal is to select an account that is as liquid as possible. This is because you want to be able to access your funds in an emergency. One option is a savings account tied to your bank. This account is separate from your daily spending account and is often linked to a bank you already use. Deposit minimums are necessary to keep this type of account open, and they may accrue minimal interest over time. A second option is a Short-term Certificate of Deposit (CD). This type of bank offering will yield higher interest rates if you promise to leave your money in the bank for extended periods. While this can help you grow your emergency reserve, you can take out your money immediately. If you do take out your money early, you may be penalized. Another more helpful option is a Money Market Account. This type of account offers a higher interest rate to leave your money in and is easily accessible to the user. The only downside is that the account is not FDIC-insured.
Reducing High-Interest Debt
Another significant financial goal Americans have in the coming year is reducing their high-interest debts. High-interest debts don’t necessarily have a specific rate attached to them. Still, in general, any debt with a higher rate than a mortgage or a student loan is considered a high-interest debt. According to Experian, this might mean your debt has an 8% interest rate or higher. Allowing these debts to sit without payment (or even minimal payment) will hurt your wallet because the interest your loan gains over each month and year adds up quickly.
When addressing high-interest debt, start by reviewing all outstanding balances and prioritizing payments on credit cards, personal loans, and student loans. Determine a specific amount from each paycheck towards debt repayment, ensuring it exceeds the minimum required for higher-interest debts. Customize this amount based on your individual or household financial situation.
You will want to choose a debt repayment method for the new year— financial experts often discuss two approaches: avalanche and snowball. The snowball method involves paying the minimum on all open accounts except the smallest debt, which you focus on by allocating extra funds. In contrast, the avalanche method pays the minimum on low-interest debts. Still, it requires additional monthly payments above the minimum on the debt with the highest interest rate.
Ultimately, your debt repayment plan is up to your discretion; however, if your goal is to attack and eliminate your high-interest debts in the new year, the avalanche method might suit your resolutions better. In addition, remember that you can always look into debt consolidation options that help you lower your interest rates, too.
Achieving Your Financial Goals for the New Year with Boost Your Score
Whatever your financial plan for the new year, it’s important to inspect what you expect. Regularly or monthly, come back to and review your goals to ensure that you are on task, or make changes to make achieving those goals more realistic. Jobs can change, unforeseen expenses can come up, and life happens. These are perfectly valid reasons to tweak your goals to make them more reachable. Remember that it is also imperative to celebrate when you arrive at certain milestones within your goal, as this is a helpful motivator to push you toward your results.
Cumulatively, one could set many different types of goals to become more financially free in the new year. Some of the most famous goals are raising credit scores, creating an emergency fund, or paying off high-interest debt. Depending on your goal type, it will require some form of diligent budgeting to ensure you get your money into the places you would like it to go. By doing so, you will be on your way to financial literacy and freedom. So, make the new year a great one, and be a goal-getter!
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