How to Set Goals for Finances- New Years Resolutions Series

The countdown to 2015 continues…though hopefully no one’s standing outside in Times Square yet waiting for the ball to drop. You never know, though. I wouldn’t put it past people.

Anyway, I thought I’d kick off some New Years resolution money talk for thirty-somethings.

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Last year, I made a resolution to put 30 percent of every paycheck I received towards savings, student loan debt and retirement. I actually started doing this slightly before New Years so I cheated a bit.

I split up the 30 percent this way- 10 percent went into my Roth IRA, 10 percent towards my savings, and 10 percent towards my smallest student loan. (My largest student loan already had a crazy amount of money going towards it because its minimum was so high. But I digress.)

And I followed my financial resolutions through thick and thin for the whole year and am continuing with them. There was a moment where I even tried to up my payout percentage to 40%, but that was way too much. Other than that- the 30% resolution was actually quite simple: whenever I received a paycheck I’d log onto Chase.com and make my transfers. There was something extremely satisfying about the whole thing.

If you’re making financial resolutions for the New Year, my advice is much like Jane’s in her last post: break down the goal into easy steps. My financial resolutions last year were simply:

1. Put money into savings

2. Pay down student loan

3. Put money into Roth IRA

A lot less would have gotten done if I’d stopped there instead of making the simple breakdown of 10% from every paycheck towards each category.

So, if you have savings goals, save yourself a headache and break them down into steps that seem so easy as to be almost automatic. In fact, you can even automate the savings process by having your bank automatically put a certain amount of money into your Roth IRA and savings account every month. Just about all banks will do this for you.

Since I’m self-employed and am paid a different amount every month, I kept my process manual. Also, I get a gleeful joy out of manually saving money, but I’m weird like that.

Anyway, this year my financial goals are:

1) Pay extra $$ towards my BIG student loan

-This is broken down into the easy steps of

a) Finish paying down the little student loan the same way I was before. Just about done!

b) Put the 10% (plus the monthly minimum) I was putting into the small loan towards the big loan instead.

Tada!

2) Find a savings account that pays way more interest than my bank. 

– Done! I guess once more I cheated on this one…I did it last week before New Years. But don’t worry if you hate your savings account, I’ll talk about better ones in another post soon and help you set that up too if you like. For now, if you’re interested in how much you should be saving, I wrote about it here.

3) Switch my Retirement Plan from a Vanguard Target Date fund to a different Vanguard account now that I have more money in my Roth IRA. 

– This involves a couple of breakdown steps including investigating Vanguard’s other options and figuring out more about how to manually choose funds. I’ll explain why I’m doing this in another post as well. And if you’re interested in retirement plans in general (or if you don’t know what the heck I’m talking about), I talk all about why retirement accounts are important here and here and here.

Of course, there’s my fourth financial resolution which I haven’t yet broken down, and that’s:

4) Discover additional sources of income. 

I lied about not having this goal last year. I have this goal every year, and I’m always messing with the breakdown. There’s quite a bit of work ahead. Sometimes breaking down resolutions can be as tough as keeping them 😉

What are some of your financial resolutions for the new year?

Are You Going to Make Resolutions For The New Year?

There are four more days until January 1st 2015, the day when at least one person you encounter will ask you: “So, do you have any resolutions for the year?” While that question can be somewhat annoying, I’m personally  giddy with excitement at the opportunity for a fresh start. I know, of course, that we can make a fresh start anytime in our lives. Still, it’s a ritual I enjoy.

Apparently, the history of making New Years resolutions comes from the ancient Babylonians who made promises to their gods at the start of each year saying that they would return borrowed objects and pay their debts. Similarly, the Romans began each year by making promises to the god Janus (after who the month January is named.) It’s funny how New Year’s resolutions have morphed from coming from a place of “giving” to now a place of “self” and “me.”

To me, New Year’s resolutions are the broad strokes changes/goals you want for your life and they’re relatively easy to decide on. The harder part is breaking them down in manageable mini-goals spread out over the course of the year. I like to come up with three or four goals or “resolutions” and then break them down into the “how” part, meaning when will you schedule this goal. Sometimes it helps to segment the year into quarters and break down the goal that way.

Here’s my first draft of my broad strokes resolutions:

  • Write more
  • Reach out to my professional contacts and send out my work more often (hope to land a manager or agent)
  • Cook at home more
  • Make my home more cozy and continue on my minimalist kick

What’s on your list? Or do you not believe in New Year’s Resolutions?

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