A new year is here, and if you’re like many Americans, that means it’s time to make resolutions to improve your life. Perhaps you want to lose weight or drop an unhealthy habit. Maybe you’ve resolved to finally get organized. Or you could make 2017 the year you take back control of your financial future.
Many resolutions are simply a promise to one’s self to build more productive habits. Losing weight is about getting in the habit of exercising regularly and eating healthy. Quitting smoking or some other unwanted behavior is all about developing the habit of self-control.
Similarly, any financial resolution is dependent on developing good habits with your money. Building positive financial habits isn’t always easy. If you’re used to making certain choices, it may be difficult to change that behavior. However, with persistence and dedication, it is very possible to develop good financial habits and build a strong financial foundation.
Below are a few habits and resolutions to consider this year. If you’re not currently implementing any of these strategies, now may be the time to start.
Use a budget.
Don’t have a household budget? You’re not alone. According to a Gallup study, two-thirds of American households don’t use a budget.1
That’s an unfortunate statistic because a budget is one of the most powerful tools in your financial arsenal. You can use a budget to guide your purchasing decisions and forecast your cash flow. You can also use the budget to see where your money goes every month, and you can then make adjustments to the budget to maximize your savings.
Think of your budget as your financial GPS on a very a long journey. You have a destination in mind, but the distance is far too great to navigate based on instinct alone. Without a GPS, it’s easy to lose your way. A budget acts as your GPS so you stay on-track to arrive at your desired destination.
Build an emergency fund.
Life can change quickly. Unexpected emergencies happen, and when they do, they can bring substantial costs. A costly emergency like home damage, medical treatment, or job loss can sink even the strongest financial plans.
Do you have a sizable emergency reserve to cover unexpected costs? If not, now may be the time to get serious about building one. Set up an automatic transfer from your paycheck or your checking account into a savings account. By automating the deposit, you can easily build a sustainable, life-changing habit.
Increase your retirement account contributions.
Do you have a 401(k) plan with your employer? Do you have a traditional IRA or Roth IRA? These accounts can be valuable tools in your effort to save for retirement, primarily because of their tax advantages.
Qualified retirement plans such as 401(k) plans and IRAs offer tax-deferred growth. That means that as long as the funds stay in the account, you don’t have to pay taxes on investment gains. With some accounts, like the 401(k) or traditional IRA, you pay taxes on distributions In a Roth IRA, your withdrawals are tax-free.
However, to take full advantage of these tax advantages, you have to fund the accounts. The more money you put into your qualified plans, the more beneficial the tax advantages will be for you. Try to increase your contributions to these accounts in 2017, even if only by an incremental amount. You can start gradually and slowly increase your contribution over time. That’s better than not increasing the contribution at all.
Ready to take back control of your financial future? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and develop positive financial habits. Let’s connect soon and start the conversation.
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