A fresh start: Navigating new year’s resolutions for financial wellness

A new year means a fresh start and an opportunity to create–and stick to–new resolutions. This applies to financial goals as well. Many people begin a new year with ideas and goals related to improving their financial situations. It’s not surprising given some recent findings from CNBC’s Your Money Survey.

• Nearly three-quarters of working Americans (74%) say they are stressed about personal finances.
• Over 60% of Americans believe they live “paycheck to paycheck.”
• 70% of Americans say they would need a yearly salary of $150,000 to feel financially comfortable; however, the average salary of an American worker is less than $60,000 per year ($59,428).

Based on surveys like these, many Americans do not feel they are in a comfortable place financially. That’s why the new year is the perfect time to reset, renew, and begin with a blank slate. Sun Loan is here to help you create–and fulfill–some New Year’s financial resolutions. Keep reading to learn how!

Assessing your financial landscape

Before you create a new financial plan for this year, take a step back to look at last year from a financial perspective. What worked? What didn’t? How can you keep improving on your financial successes? How can you decide on a new strategy for whatever didn’t work out so well? Let’s reflect using the following steps:

Conducting a comprehensive financial audit

When looking at the full picture of your finances, there are three main things to consider:

1. Income and expenses analysis: To get a baseline for your finances, take a look at your monthly net income (the amount you make after taxes are deducted from your paycheck), then multiply that by 12 to determine your annual net income–how much you actually make in a year. Next, take a look at all of your monthly expenses–rent, heating/cooling, electricity, gas, TV/internet, insurance payments, loan or debt payments, groceries, etc. Add those up for each month, then multiply by 12 to see what (on average) you pay in expenses over a year. Hopefully, your annual income adds up to be a higher number than your annual expenses. If not, and you pay more than you earn, you’ll need to take another look at how you’re managing your money so you can reverse that.
2. Debt evaluation: Next, look at all debts that you currently make payments on each month. This includes any types of loans, such as personal loans, mortgages, car loans, student loans, home equity loans, and credit card debts. Take a close look at the interest rates and annual percentage rates, then do some research to see what current rates are. If your rates are at least 2% higher than the current rates, it may be worth your time to refinance your loans with the lower rates to save money and pay down debt. Even if you don’t refinance, it’s important to evaluate your debt so you know how much money you owe on your loans and credit cards. This will help you with your financial goals.
3. Emergency fund assessment: You never know when an emergency will hit, and you want to be sure you’re covered if one does. Many financial experts estimate that you should always have between three and six months’ worth of expenses saved in the event you lose your job, there’s a medical emergency or death in the family, you sustain expensive property or vehicle damage, and other unfortunate situations. If you don’t have these funds saved–or if you don’t have an emergency savings fund at all–it’s a good idea to start thinking about putting money aside each month as part of your budget.

Setting SMART financial goals

To help set any type of goals, many people use what’s called the SMART system. And while forming goals of any kind is indeed smart, these SMART goals use specific attributes, or features, that help you create achievable goals and meet them. SMART stands for:

• Specific
• Measureable
• Achievable
• Relevant
• Time-bound

Let’s take a look at a few examples of SMART goals you may want to consider.

Saving money

Say you want to take a nice vacation next summer with your family, but you don’t have money put aside for it. Let’s create a SMART goal that helps you do that.

• Specific: You want to save money for a family vacation. How will you do this? By cutting back on other expenses and putting that money toward the trip. For example, say you spend $200 a month dining out or bringing home takeout food. If you cut that number to $50 a month, you’re saving $150 each month, which can be put toward your vacation fund. If you have 10 months to save, that can get you to $1,500. Analyzing your expenses can help you find where you may be able to save more money if the trip is more expensive.
• Measurable: Let’s say the vacation you want to book will cost you $4,000. There’s your measurable number to work toward. From there you can calculate how much you’ll need to save each month to reach that goal.
• Achievable: Is $4,000 or more an achievable number to hit before next summer? You’ll need to review your finances to determine the answer–and how you’ll manage to save that money.
• Relevant: You’ve been wanting to treat your family to a nice vacation for years, but you also need to make sure the expense fits into your budget without causing major financial problems. Anyone can charge a $10,000 vacation to a credit card–but if you can’t afford to pay that off, you’re setting yourself up for debt and financial hardship. Taking all of your finances into consideration, if you’ve determined that $4,000 is a reasonable and achievable goal that fits within your overall financial situation, then keep moving forward.
• Time-bound: If you’re planning on taking this vacation next summer, you know how much time you have to save before you need to pay it off. From there you can budget and save accordingly.

Many families experience similar scenarios, where they simply don’t have $4,000 magically waiting for them to spend on a vacation. In most instances, families have to cut expenses elsewhere to save that money–and that’s really the main focus of this goal. How and what will you cut back to reach your goal? We used dining out and takeout as an example here, but there are many other non-essential expenses worth considering–fewer day trips or outings (movies, museums, sporting events, etc.), less energy consumption, and temporarily canceling movie or newspaper/magazine subscriptions are just a few examples.

Paying off debt 

Paying off your debt is a great goal to set in the new year. By using a SMART goal, you can create a realistic plan that puts you in a better financial place.

• Specific: You want to pay off all your debt besides your mortgage within the next five years. You plan to accomplish this by creating a debt repayment plan and prioritizing high-interest debts first. How will you accomplish this goal? By setting aside some of your paycheck each month to pay down the debts? By cutting down on credit card use? By eliminating certain purchases each month? By getting a second job? How you choose to get there is up to you, but these are options to consider when aiming to pay off your debts.
• Measurable: The total amount of your debt will determine the measurables in this situation. Once you have that number, you can figure out how much you need to pay off monthly in order to hit your goal of being debt-free in five years.
• Achievable: Is five years enough time to save for debt payments? It depends on how much your debts are. If you owe tens or hundreds of thousands of dollars, five years may not be achievable. But if your debt is lower and you stick to the plan you create, five years could be a very achievable goal.
• Relevant: Why is it a goal of yours to eliminate your debt? So you can start saving? To not have the stress of debt hanging over your head? There are plenty of good, relevant reasons to want to get out of debt, which provides plenty of motivation to make a smart goal to get there.
• Time-bound: We threw out a hypothetical of five years–as you do this SMART goal exercise, determine the time frame that is achievable for you. It could be 10 years or 20 years; remember, there’s no right or wrong goal. It’s whatever works best for your situation.

Building an emergency fund 

An emergency savings fund is important for every family to have if it’s within their means. Here’s a SMART goal example for building an emergency fund:

• Specific: I want to create an emergency savings account and contribute to it each month by putting aside a small percentage of each paycheck or by cutting back on certain expenses.
• Measurable: I want to have $3,000 saved in that account by the end of the year.
• Achievable: If $3,000 doesn’t seem realistic, lower the figure to an amount that’s achievable for you.
• Relevant: Do I need to set up an emergency savings fund? If you’d like to have a financial cushion in case an unexpected expense comes up, then yes, you should have an emergency savings fund.
• Time-bound: If you want to have $3,000 in your emergency savings fund by the end of the year, you’ve made your goal time-bound.

Remember, everyone’s financial situation is different. What works for one person may not work for you. That’s why it’s important to create SMART goals, because it allows you to take a step back and really look at your finances and then figure out how to reach your goal through well-thought-out steps.

Creating a realistic budget

Dedicate a section to budgeting, which may be the most important resolution someone sets. Explain the importance of budgeting in achieving financial goals and include a subsection on setting a budget. 

Steps to create an effective budget

Whether your resolution is to save $100 a month or $1,000 a month, the most important part of your savings plan is creating a realistic budget. When you thoughtfully set a budget, you are able to dedicate certain portions of your money toward essentials, such as your monthly bills, while also giving yourself the flexibility to save money–whether that’s for retirement, vacations, a home project, or even your hobbies. When creating a budget that allows you to comfortably pay your bills and also save, you cut out the stress that comes with debt and living paycheck to paycheck.

How do you set an effective budget? We’ll show you!

Steps to create an effective budget

1. Track income and expenses. We mentioned this when doing your full financial audit. Figure out your monthly net income, then multiply that by 12 to determine your yearly net income. Then look at all of your monthly expenses–rent, utilities, gas, TV/internet, insurance payments, groceries, etc. Add those up for each month, then multiply by 12 to see what (on average) you pay in expenses over a year. These numbers will help you determine what kind of budget you can set.
2. Categorize spending. Part of this will come from your monthly expenses mentioned in step 1. But in addition to those, you need to factor in any loan and/or credit card payments you make each month as well as what you spend in other categories. This could include hobbies and entertainment, subscriptions, medical expenses and prescriptions, takeout/restaurant expenses, and even small things like your daily cup of coffee from the local cafe or convenience store. Remember…even the smallest purchases add up, especially when they’re daily purchases. Separate all your expenses into categories and determine which are necessary and which are “nice to have.” You obviously need to pay your credit card bills and take your medications–so those are essential. But are the other categories?
3. Identifying areas for adjustment. This is where your spending categories come into play. Do you really need that fourth and fifth movie streaming subscription? Do you have to subscribe to the newspaper when you can get your news online? Wouldn’t it be cheaper to brew your own coffee at home rather than spend $5 every day on a latte? To create a realistic budget, these are the decisions you have to make. Yes, it may require some sacrifice on your part. But cutting your daily cup of coffee to once a week could save you up to $20 per week–that’s $80 per month. And almost $1,000 a year, just by brewing your own coffee most days of the week! That $1,000 goes a long way toward you hitting your financial goals, so adjust wisely!

Embracing lifestyle changes for financial success

It’s important to align your lifestyle, mindset, and buying decisions to what’s most practical, affordable, and budget-friendly. If your income doesn’t allow you to comfortably purchase something, don’t do it–that decision will only land you in hot water financially. This is how to achieve the right mindset when living within a budget:

Cultivating mindful spending habits

This is about needing vs. wanting, which really applies to everything. Most people need to live within their budgets, and that means making smart buying decisions based on needs, not wants. Say you want to treat your family to a baseball game. Ask yourself: Do I need to go to this baseball game? Probably not. But you should try to budget a little bit for activities you enjoy. So, now ask yourself: Do I need first level seats for $125 each? Or can we have just as great a time in the second level for $40 a ticket? Making a smart decision can save you over $150.

This type of logic can help you with all your shopping. When buying food, you can pay $2 for a box of name-brand spaghetti, or you can purchase the store brand for $1.29. That 71 cents may not seem like a lot, but when you use that approach throughout your grocery list, you’re looking at $20, $30 in savings–and that is significant. Living frugally doesn’t have to mean living poor. Sure, it may require some sacrifices on your part, but being frugal is a strategy to help you save money for your bigger goals. It’s important to keep that in mind.

Exploring cost-saving alternatives and negotiating bills

As we just mentioned, buying lower-cost items that are of equal quality is a smart way to save money. Other strategies include using coupons to shop, browsing different advertisements for the best deal on the products you’re purchasing, and even buying lightly used products rather than brand new.

For example, purchasing a pre-owned vehicle that is in good condition can save you thousands over a brand new car. If there’s a book you want to buy, check it out from your local library for free or purchase it from Amazon or eBay used. There are tons of items that don’t necessarily have to be brand new out of the package to serve their purpose. Make it a habit to check out online (or physical) yard sales and marketplaces, thrift shops, and other similar places to save money.

When it comes to food shopping (as well as home goods shopping), we mentioned how buying store brands saves you plenty of money. Also consider shopping at discount stores such as Aldi and Lidl for groceries, and outlet stores for clothes and appliances. There are also money-saving apps like Rakuten that offer discounts from your favorite stores when you purchase through their app. It’s easy and it works!

As far as monthly bills, consider cheaper alternatives to what you’re using now. For example, if your cable bill is outrageous, it might be time to cut the cord and go with streaming only. For your mobile phone service, look into cheaper providers such as Mint Mobile, Cricket, Visible, Boost Mobile, and others that can save you hundreds over the “big name” providers.

And did you know that you can actually negotiate your monthly bills? It’s true! If you want to lower your cable bill, phone bill, insurance payments, subscriptions, and other services, you can actually negotiate with the company for a lower price. It’s important to have a strategy going in; do your research and know what a more realistic and affordable payment would be. Plus, you need to negotiate with the right people, or else you won’t get very far. Most times, if you threaten to cancel your service and move to a competitor, your service provider will often agree to your terms or something close–they don’t want to lose your business completely. Nerdwallet offers some helpful tips on how to negotiate your bills to a much more manageable payment.

Building a support system for accountability and motivation

As with any challenge, it’s always helpful knowing you’re not alone. Creating and meeting financial goals, while very rewarding once accomplished, can be difficult, especially if you’re making sacrifices to reach those goals. That’s why it’s important to have a support system to help you stay on course.

Having people around to keep you accountable along the way is very helpful. Plus, your supporters can provide motivation to reach your goals. Your support system can be family members or friends–especially anyone who has financial experience. There are even support groups you can join, with people in similar situations as yours. You could hold family meetings each week to review expenses and see how everyone is progressing toward your goals. No matter what your support system looks like, having one keeps you motivated and accountable as you save.

Leveraging technology for financial management

Managing your finances and tracking the progress toward your financial goals may sound overwhelming, but it’s actually pretty easy to do thanks to the many available apps and tools. Some of them are even free! Let’s take a look at some of these tools and how they can help you reach your financial goals.

Exploring apps for budgeting, saving, and debt payoff

There are plenty of apps out there that focus on budgeting, saving, and paying off debt. Some of the best include:

• YNAB (You Need a Budget) and EveryDollar: Lets you dictate how much of your income should go toward various categories, including spending, savings, and debt.
• Goodbudget: Helps you plan your finances by dividing your monthly income toward specific spending categories called envelopes.
• PocketGuard: Allows you to connect to your bank accounts, credit cards, loans, and investments and also track bills; also shows how much you have left to spend after setting aside funds for necessities, bills, and your financial goals.
• Zeta: Offers both personal and joint accounts that allow you to pay bills, save for goals, and track shared expenses; in-app messaging lets you communicate with your family about your budget.
• Rocket Money: Allows you to create a budget that automatically monitors spending, separates transactions into spending categories, sends notifications about upcoming charges or a low balance, and more; also features optional services, like bill negotiation, for an extra fee.
• Wally: A GPT-powered app that offers customizable budgets, progress trackers, spending insights, financial calendars, and more–but you must have an Apple device to use this app.
• Simplifi: Helps you manage your finances with a monthly budgeting system, as well as a look into debt repayment, investments, tax planning, and organizing personal and business expenses.

Automating savings and debt payments

If you’re looking for an app to do a lot of the work for you, these are great choices:

• Qapital: Helps you save small amounts of money but lets you set up how you want to save your money.
• Chime: Provides several auto-savings features as well as an easy way to automatically put a percentage of your direct-deposit paycheck into your savings account.
• Debt Payoff Planner: Designed to help you create a detailed plan to pay off debts; takes some of your stress away by monitoring multiple credit cards, loans, car payments, and other bills; also allows you to choose from a variety of payoff strategies while displaying your remaining balances, APRs, and minimum payments.
• Undebt.it: Provides an easy-to-follow payment plan for paying down debts. You can choose from up to eight different debt payoff methods that help accelerate the process.
• Bright Money: Ideal if you’re focused on paying down credit card debt; will optimize your payments by analyzing your spending, balances, and APRs, and it can automatically draw funds from your bank account and direct them toward your credit card balances.
• Most bank apps also include useful features and tools similar to the apps and programs we’ve listed here.

Monitoring financial progress through digital tools

If you’re looking for an easy way to track your financial goals and progress, these apps would be an ideal fit:

• Empower Personal Dashboard: Tracks your net worth, creates a savings plan, and allows you to sync almost any investment and bank account, including credit cards, retirement, and taxable accounts.
• Stash: Includes features where you can track your spending and set savings goals; allows automation of goals, with tools like round-ups and automatic investing to help you achieve them efficiently.
• Quicken: Long-trusted program that helps you manage all your personal finances, save more toward your goals, automate payments and finances, and stay on budget.
• Excel or Google Sheets spreadsheets: Help you track your finances and expenses–though these offer less automation than most other apps.

If you want to stay old school and prefer organizing with physical lists, there’s always a pen and a pad of paper! Just make sure you’re capturing all the information you want to track as you’re creating your paper lists–and don’t forget to keep them organized!

Overcoming common obstacles

While planning and technology can certainly help make financial management easier and more convenient, it’s impossible to predict the future. There may be times where you face obstacles and challenges along your road to achieving the goals you set. Let us reassure you–it’s okay! Life happens, and sometimes plans need adjustment based on your situation. Below are some common challenges people face and how to adapt to them so you can still meet your financial goals.

Addressing challenges such as unexpected expenses

You could be months into your financial plan, and everything is going smoothly. You’re saving, you’re paying down your debt, and things are looking good. And then…your refrigerator breaks. Or your car’s engine decides to stop working. Or there’s a medical emergency. Unfortunately, these things happen and they require money. This is where an emergency savings fund comes in handy–if you already have one set up, these are the times you’ll want to dip into that money so it won’t impact your budget. If you don’t yet have an emergency account set up, there are some options.

• You could pay for the expense with a credit card; if you have multiple cards, use the one with the lowest APR or interest rate. Yes, paying with a credit card adds to your debt, but it gives you some breathing room as far as paying for the expense. If you go this route, just make sure to recalculate your credit card debt with the new expense and adjust your savings and budget accordingly.
• You could also take out a loan, which could be a less expensive option than a credit card depending on interest rates and APRs. This will provide the cash you need to pay for the expense–you’ll just need to factor this new loan into your budget similar to if you paid with a credit card.
• If you’re comfortable asking a family member or friend to borrow money, that could be an interest-free way to pay off your emergency expenses; plus, friends and family are more likely to be flexible when it comes to paying back the loan.

Adapting the plan in case of income fluctuations

Changes in income are also hard to predict, and most people are not prepared for the loss of a job or a cut in pay. This sudden lack of income (or less income) makes it difficult to stick to your savings plan–but don’t abandon it. You may need to make some temporary lifestyle changes until you land a new job or find a different source of income. This is where living frugally can really pay off.

Lower your expenses wherever you can–whether that means using less electricity at home, filling your car with gas less frequently, negotiating lower monthly bills, and using cost-saving techniques when shopping. This should help soften the blow a bit, and the reality is, you may not be able to save as much–or anything at all–for a short period of time. That’s ok. Your savings goals will be waiting for you when you start a new job. And perhaps it’ll even pay you more, so you can adjust your budget and goals to reach them sooner!

Staying on track

As we said, sticking to a budget and accomplishing your financial goals is not easy. That’s why it’s important to stay on track toward your ultimate financial goals and resolutions. Here’s how:

Periodic reviews and adjustments to the financial plan

It’s always a good idea to review your financial plan occasionally just to make sure your goals are still within reach. If your financial situation has changed (for better or worse), it’s important to adjust the plan and goals so they’re still achievable. By keeping your financial resolutions within reach, you’ll stay more motivated to accomplish them.

Setting new goals as previous ones are accomplished

Accomplishing any of your financial goals is a victory. But it’s not the end. Once you reach a goal, set another to keep yourself motivated to continue practicing good money habits. The last thing you want to do is accomplish a goal and then erase all your progress by getting into bad habits. Stay the course, keep setting new financial goals for yourself, and continue celebrating them once they’re met.

New year, new you

Setting financial goals and resolutions is important when you’re looking to pay off debt, save money, and plan a budget. There may be some bumps in the road, but if you stick with your goals, you’ll find yourself in a much better financial situation.
Remember, any progress you make is good, but keep pushing yourself with more goals as you accomplish others. Achieving your financial goals is part of a journey, one that you’ll be on for the rest of your life. So stick with your goals and you’ll see success all along the way. And remember, Sun Loan is always here to help you with your financial goals. Visit your local branch today. Happy New Year!