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I guess I’m an optimist, because I always like to make resolutions for myself when the new year rolls around. I have a new baby, a good job, and want to be better with money in 2019. What financial goals should I aim for this year? — Kieran, 34, Boston
If you’re anything like me, there’s plenty of stuff to work on in the personal development department. It makes sense that we decide to attack at least some of those things when the new year begins.
As with any goals, the best resolutions are those that are big enough to make a positive impact on our lives, yet realistic enough to accomplish. Here are a few that you might consider.
Mind Your Retirement Plan
For next year, the IRS hiked the contribution limit for 401(k)s and other workplace retirement plans to $19,000 a year. If you didn’t reach the cut-off this year ($18,500), try to get closer in 2019. At the very least, you should be investing enough each paycheck to maximize your employer’s match.
“Begin with baby steps,” says Rebecca Kennedy, owner of Kennedy Financial Planning in Denver. “You probably won’t even feel a 1-3 percent decrease in take-home pay, especially if you’ve recently received an equivalent raise.”
Sometimes the easiest way to build good habits is to have computers do the work for you. So it is with retirement savings, where payroll deductions ensure that a portion of your pay goes toward your long-term needs.
Automation also makes it a lot easier to build up an emergency savings fund, says Erik Kroll, who runs Milwaukee-based Hilltop Financial Advisors. One way to do that is to set up monthly transfers from a checking account into a separate savings account. Or, if you have direct deposit at work, you can have a portion of your paycheck go into your emergency account right off the bat.
Kroll typically tells his clients to put the money in high-yield savings accounts like those at Ally Bank, which offers a two-percent rate of return that leaves most brick-and-mortar banks in the dust. Other online competitors also offer impressive yields, but sometimes only if you meet a certain savings threshold. “With Ally, you don’t need a minimum balance to get that rate,” says Kroll.
Get Serious About Budgeting
There’s some evidence that younger parents are actually improving in this regard. Recent data from the Society of Actuaries showed that 61 percent of Millennials successfully stick to a budget, compared to 49 percent of Gen Xers.
If you’re not one of them, the New Year is a great time to start. You can find any number of great apps that can help you keep track of what’s going into and out of your bank accounts each month. Kroll likes You Need a Budget (YNAB), which costs $6.99 a month, the best. With YNAB, every dollar in your account gets earmarked for a specific expense category. And if you overspend in one area, you can move the funds around to cover the shortfall.
Analyze Your Recurring Costs
Annual memberships can be great when you’re paying for something truly important to you. But most of us have signed up for things we thought we’d have a lot more time to enjoy. If you’re not using the gym much or reading the pile of magazines that keep showing up in the mail, it might be time to cancel.
Kroll says some couples may also want to examine whether they need a cable subscription when there are so many streaming services available. The average monthly cost for cable is $106, according to Leichtman Research Group; most streaming content costs less than half that amount. “Unless you’re an avid sports fan, I would consider cutting the cord,” says Kroll.
Implement the 24-hour Rule.
Some of our most regrettable buying decisions come on the spur of the moment, when something on the store shelf suddenly catches our eye. The start of a new year is a good opportunity to shed that tendency, says Kennedy.
She recommends sitting on discretionary purchase decisions for 24 hours before following through. “Often the allure of that new thing will fade, and you’ll have a clearer head to decide if it’s truly a smart decision.”
Re-Examine Your Priorities.
If splurging is your Achilles’ heel, Kennedy suggests developing a new mindset about your spending. Kennedy says too many of her clients are worried about keeping up with the Joneses, constantly comparing their lifestyle with that of their friends and neighbors.
“Envying what others have is a sure fire way to derail your long-term goals,” says Kennedy. “If keeping the blinders on is too hard, consider changing the company you keep.”