With the start of a New Year often comes pressure to make big resolutions when it comes to health, hobbies, finances and much more. But you don’t have to overhaul your financial life in one year. Some things, like building credit, take time. That’s why we’ve put together a list of practical first steps for some common New Year’s resolutions.
The Resolution: Make a budget.
The First Step: Review your purchases.
“Budgeting” sounds nice, but making budgeting a goal doesn’t exactly offer the actual steps you need to be successful. After all, there are tons of budgeting strategies around every corner, but it’s hard to choose one when you feel like you’re starting from scratch.
Taking a look back is a great starting point for preparing for your financial future in 2022. You can’t know what you should be spending if you don’t have a good idea of what you’re spending already. Look at your checking account and credit card statements in order to group spending categories and calculate totals for your review.
The first step to finding your best budget is to review your purchases from the last few months, accounting for the changes in spending you might’ve seen during the holidays. Think about how much you spent and what you spent it on. Once you’ve done this, the next step is to decide how you should be allocating your money and where you can cut costs.
The Resolution: Build your credit.
The First Step: See where your credit stands.
Check your score in Purdue Federal digital banking. Then, take stock of your lines of credit. If you don’t have any lines of credit, your next step may be starting small with a credit card designed to help build credit responsibly. Our Purdue Federal Visa Traditional Credit Card is a great place to start.
Once you have a credit card, pay off your balance each month and always make payments on time to start improving your score quickly.
While “building your credit” is on every list of resolutions, you might have established credit and feel secure. If this is the case, your resolution may be paying off a line of credit (see our pay down debt section) or assisting your children in building their own credit.
The Resolution: Prepare for retirement.
The First Step: Consider your retirement timeline.
There’s a lot to consider when it comes to retirement beyond just saving. There are plenty of saving strategies and special accounts or investments available to people of all ages. But it’s impossible to know what could work if you haven’t estimated at least a few details of retirement.
Think about when you actually want to retire and if that seems feasible with your current lifestyle. This is also a great time to estimate your post-retirement spending, if you’re able. With these details (loosely) nailed down, it’s easier to take the next step of deciding how much to set aside each paycheck in a 401k or other savings method.
By the way: If you’re not a math person, don’t worry. These calculators can help with all kinds of retirement calculations.
The Resolution: Pay down debt.
The First Step: Decide on the snowball or avalanche.
This time of year, we know neither of these sound great. But they’re actually strategies for paying down debt, and you don’t need to trek out into the cold and snow to do them.
The snowball method starts with paying off your smallest debt first, then working your way up to your larger debts.
The avalanche method involves paying off your debt with the highest interest rate first and then move down the line.
By the way, there are other debt payment strategies besides these that may suit you best. For example, it may be more feasible to focus on having healthy credit lines. This means having a balance that’s under 25% of each credit line.
You can learn more about strategies here, or you can talk to a financial counselor about your specific situation.
The Resolution: Focus on financial wellness.
The First Step: Find a resource that works for you.
While there are plenty of resolutions when it comes to hitting the gym, there’s another kind of wellness that should make your list this year, too. But what does it mean to focus on financial wellness?
Finding a resource you like and trust is a good way to start focusing on financial literacy. Use our blog and other resources as a jumping-off point. Then, try to check out one article each month that’s relevant to you.
You don’t have to make huge financial changes right away in the new year. Use these practical first steps to smart small and set resolutions you can actually keep.