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‘Tis the time for New Year’s resolutions, and financial ones are top of the list for many Americans. While planning on adopting new financial habits and creating a roadmap for financial well-being is always a great start, sticking to these can be tricky.
“Many Americans want to improve their long-term financial outlook in 2024,” said Kelly LaVigne, vice president of consumer insights, Allianz Life, adding that nearly half of Americans in the New Year’s Resolutions Study from Allianz Life said they intend to make a resolution to manage their money better or save more in the coming year.
“But that resolution is vague,” Lavigne said. “The idea for a financial resolution may start out with broad intentions. For success, you’ll need to get specific and lay out the details of how you will actually achieve that goal.”
From simple, immediate steps to more long-term ones, financial experts shared their tips to achieve your goals.
Increase Retirement Savings
LaVigne noted that one of the most common ways people want to better their finances is by increasing their retirement savings, according to Allianz’s study, which is a worthy goal.
“But you need to do some hard work to know what your savings goal will be, how you will save, and what type of account the money will go into,” LaVigne said. “The good thing is that it is never too late to save for retirement.”
So, if your goal is to save more for retirement in 2024, you’ll want to figure out where, how much, and other logistics. LaVigne outlined a few ideas for specific goals, including increasing your 401(k) contributions in order to gain the full match from your employer; increasing your contributions to your 401(k) or IRA by 1%; and directing half of your monthly contributions into a Roth account in order to mitigate future tax risks.
Cancel at Least 50% of Your Discretionary Subscriptions
This single step might help you lower your financial anxiety, said Bobbi Rebell, CFP, founder of Financial Wellness Strategies and author of “Launching Financial Grownups: Live Your Richest Life by Helping Your (Almost) Adult Kids Be Everyday Money Smart.”
For example, she said, choose between Netflix and Hulu.
“Then freeze your total number of subscriptions and only add one if you remove one. By capping your ongoing discretionary expenses you will feel more in control, and have a higher appreciation of the subscriptions you do actively choose to keep,” she added.
Hop on the ‘Career Cushioning’ Trend
That means being ready for a career disruption even if you have no intention of leaving your job, according to Rebell. For example, she said, take a course that will give you a certification to make you qualified for a related but different job in your field.
“Make the effort to get out and expand your work/friends circle so you have a broader network should you need it,” added Rebell. “By having a backup plan, you will lower your financial stress and be in a stronger position if you ever need it.”
Establish and Contribute To a Roth IRA
As Vanguard explains, a Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. According to Roth IRA rules, as long as you’ve owned your account for five years and you’re age 59½ or older, you can withdraw your money when you want to and you won’t owe any federal taxes.
Matt Willer, managing director and partner at Phoenix Capital, explained the benefits of establishing and contributing to a Roth IRA.
“Consider the following,” he said. “A 21-year-old that starts with the maximum Roth contribution of $6,500, then makes that same contribution annually, invests in a modest 6% yielding instrument with compounding and doesn’t touch the funds — 50 years later, that account balance is over $2 million, all with just $6,500 a year in contributions. And if you start the above when you are 30, at age 70 you’ll have over $1 million, while if you start at age 40, you’ll have about $568,000 at age 70.”
Budget for Savings
Robert R. Johnson, PhD, CFA, CAIA, professor of finance at Heider College of Business, Creighton University, noted thatWarren Buffett said: “If you want to make saving a priority, take a look at how you budget. Do not save what is left after spending; instead spend what is left after saving.”
In turn, according to Johnson, if you want to make savings a priority, it cannot be a residual — what is left over. It should be a line item on your budget.
“You don’t successfully build savings by simply taking what you have left after all your expenses. We accomplish what we prioritize,” he said.
And automating these is a wise approach, according to him.
“People should try and automate as many financial decisions as they can. One must make saving money a habit,” he said. “For instance, have an amount taken out of each paycheck and put directly into an investment fund — most appropriately a low cost stock index fund.”
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