Top 10 financial New Year’s resolutions and how to fulfill them

With the year 2023 winding down, that means it’s time to think about resolutions for the coming year. As the year has seen an easing of inflation, the aftermath of increased costs has left a lasting impact on our savings and financial wellbeing.

More than half of Americans (52 percent) said in a 2023 Bankrate survey that money negatively impacts their mental health, marking a significant increase from 42 percent just a year ago.

In the face of financial challenges, it’s crucial to explore practical money resolutions that not only brace you for economic shifts but also ensure you’re feeling good overall. Improving your finances in the coming year can benefit your overall health by reducing your worries over being in debt or not having enough in your savings account to cover an emergency.

Financial wellness statistics

According to Bankrate’s 2023 money and mental health survey:

• Of those who worry about money, 56 percent have that worry at least once a week, and 29 percent worry daily.
• A large majority (82 percent) of those who say money negatively affects their mental health blame economic factors, including: inflation (68 percent), rising interest rates (31 percent) and not having a stable income or job (29 percent).
• Meanwhile, 56 percent say not having enough emergency savings contributed to negative mental health impacts.
• Gen Xers and millennials were most likely to say that money negatively affected their mental health of the generations — 60 percent and 55 percent said so, respectively.

Americans and their financial goals

Money issues are impacting Americans’ quality of life and progress toward financial milestones:

• Over half (56 percent) feel behind in their retirement savings. (Retirement savings survey)
• Similarly, 57 percent are uncomfortable with their level of emergency savings. (Emergency savings report)
• Of those who do not currently own a home, 47 percent say the current housing market is why they don’t. (Financial security survey)
• While 37 percent are hopeful that their financial situation will improve in 2024, 26 percent believe that it will get worse.

Here are 10 practical resolutions that can help improve your finances, along with expert tips on how to stick to them.

1. Consolidate credit card debt

The total amount of Americans’ credit card debt is over $1 trillion as of the third quarter of 2023, according to the Federal Reserve Bank of New York. Moreover, a Bankrate credit card survey found that 47 percent of credit cardholders carry debt from month to month.

Credit card debt can hold you back from achieving financial goals, with 19 percent of those who believe they’re financial situation won’t improve in 2024 blaming the amount of debt they have. The burden of high interest rates and growing balances hampers progress toward homeownership, retirement and emergency savings.

If you have credit card debt, consider making it a goal to pay it off. There are several approaches you can take, but two common strategies are paying off your highest debt first (the debt avalanche method) and paying off your smallest amount of debt first (the debt snowball method).

If you’re struggling with making payments, consider credit counseling, a low-interest balance transfer, a personal loan or even debt settlement.

2. Create a practical budget

In 2024, 13 percent of Americans identified better budgeting as their primary financial goal, according to Bankrate data. A well-crafted budget is instrumental in reaching financial milestones. By creating a plan tailored to your income and priorities, you can ensure progress toward your goals.

“Finances are personal to each household,” says Mark Lau, CFO of Alliant Credit Union. “That is why it is vital to check in with yourself and your family and determine what categories are needs or wants.”

Balance is key to a sustainable budget. Allocate a portion of your budget for enjoyable activities and treats, while still earmarking funds for savings and debt reduction. It’s important to incorporate both responsible planning and the enjoyment of life’s pleasures.

“While certain categories like the ‘wants’ can ease everyday life, cutting back in 2024 might involve reassessing expenses, being mindful of unnecessary spending and considering more cost-effective solutions,” Lau says.

Money management apps are good tools for keeping track of where your money is going. Some banking apps offer similar tools.

3. Prioritize saving money

Of Americans who are worried their financial situation won’t improve in the new year, 9 percent blame their spending habits, Bankrate data shows. One way to counteract bad spending habits is to focus on saving first.

An easy way to build savings is by automating contributions, which alleviates having to think about how much money to set aside each month.

Many employers allow employees to divide their paychecks so that different amounts go into different accounts. Another option is to set up automatic transfers between bank accounts. Regardless of which option you choose, make it a priority to have your savings automated.

You can also build up your savings more quickly by switching to a bank account that pays a higher interest rate. These often can be found at online banks, which don’t need to pay for the overhead costs of maintaining branches.

4. Start an emergency fund

Almost one-third (32 percent) of Americans have less money in emergency savings than they did at the beginning of the year, according to Bankrate’s 2023 emergency savings survey. But an emergency fund is an important financial tool that can help deal with unexpected expenses, such as home or car repairs.

The new year is as good a time as any to start (or grow) your emergency fund, and 15 percent of those surveyed by Bankrate consider saving more for emergencies their main financial goal. In general, experts recommend saving three to six months’ worth of living expenses.

Start by opening a separate and dedicated high-yield savings account. After that, consider these four tips:

• Evaluate your spending and look for areas where you can save.
• Set a savings goal.
• Set up automatic contributions.
• Try to increase your contributions over time.

In addition to being able to cover unexpected expenses, an emergency fund could also help if you become unemployed by enabling you to pay for necessities like housing, transportation and food.

5. Boost your retirement savings

Saving for retirement is one of the most important aspects of a sound financial plan. And many Americans — 21 percent — regret not saving early enough for retirement, according to a Bankrate survey.

“Use [the new year] to boost or maximize contributions to 401(k)s or HSAs, plot out holistic retirement goals (e.g., Where will I live? Will I work? How much to budget for travel?) and, no matter your age or life stage, take meaningful steps to boost your financial wellness,” says Lorna Sabbia, head of retirement and personal wealth solutions at Bank of America.

There are a few ways you can boost your retirement savings. For one, if your employer offers a 401(k) match, be sure you’re contributing enough to get the full match since it’s essentially free money. Another thing to consider is looking at where your money is being invested. Many experts recommend investing in a diverse portfolio of assets to reduce your risk but still achieve attractive returns.

Finally, it’s important to remember that the only way you get the market’s long-term average return of 10 percent is by holding through all the tough times.

“Your retirement savings will grow quicker if you pick a solid long-term plan and then stick with it through the good and bad times, but especially the bad times,” says James Royal, Bankrate principal investment and wealth management reporter.

Royal says that investors should continue adding to the account and avoid selling, no matter how tempting it may be.

6. Learn investment strategies

Don’t limit your investing to only making tax-advantaged retirement contributions. Investing can help you boost your financial well-being, as it can be a way to outpace inflation and increase your purchasing power. In fact, 27 percent of Americans believe money from savings and investments will improve their financial situations in 2024, according to Bankrate data.

If you already have an emergency savings account, consider setting up an investment account for goals with specific time horizons, like early retirement or saving for a house.

Royal says that some of the biggest perks of investing outside of your retirement account include:

• No limit to what you can save.
• Tax deferral benefits on unrealized gains (stocks you don’t sell).
• Immediate access to the cash without penalties or other restrictions.

If you’re just getting started, consider looking into a robo-advisor, which will do the investing for you after taking your risk tolerance and ideal earnings into consideration.

It might also be worth including certificates of deposit (CDs) in your investment portfolio, according to Lau of Alliant Credit Union.

“Certificates of deposits offer a fixed interest rate and principal protection, making them a more sustainable option than equity investments,” he says. “Equity investments are subject to market fluctuations and risks. Additionally, CDs provide a predetermined return, offering a sense of security for investors.”

7. Improve credit score

A good credit score varies depending on the scoring system. For example, FICO considers a good score to be 670 to 739, while the VantageScore scale considers 661 through 780 to be good.

Either way, your credit score plays a critical role in determining whether you get access to financing and other financial services you need. Your credit score can determine how much interest is paid on a loan, for example, and in some states credit scores are a factor in setting car insurance rates.

To increase your credit score, consider these four tips:

• Pay all bills on time and in full.
• Lower your credit utilization ratio.
• Don’t apply for new accounts too often.
• Consider meeting with a financial advisor or expert at your local bank to assess your personal financial situation and determine ways to improve your score.

8. Improve financial literacy

Financial literacy empowers consumers to make informed decisions, navigate complex financial situations and plan for a secure future. According to Bankrate data, 27 percent of Americans rely on advice from friends and family for financial guidance, while 20 percent consult with financial advisors or other professionals.

Set aside time each week to engage with educational resources, whether that be reading books, following reputable financial blogs or listening to a podcast.

Here are some accessible ways to expand your financial knowledge:

• Read widely. Explore books, articles and reputable websites on personal finance.
• Attend workshops and webinars. Many organizations and financial institutions offer free workshops or webinars on various financial topics, where you can learn from others’ experiences and ask questions.
• Utilize online courses. Platforms like Coursera, Khan Academy and others offer free or affordable courses covering a wide range of financial subjects.
• Use a financial app. Some apps, such as Zogo, are designed not only to manage your money but also to educate users on personal finance.
• Follow financial experts. Stay informed by following established financial experts, blogs or podcasts. These sources can provide timely and easily-digestible advice and insights.

9. Update your beneficiaries

It’s a good idea to revisit your beneficiary designations soon after you’ve experienced any life-changing situation. Designating someone as a beneficiary for one or more financial accounts entitles the person to the benefits of the account upon your death. People commonly named as beneficiaries include spouses, children or other relatives.

Accounts for which beneficiaries are often designated include bank accounts, life insurance policies, brokerage accounts and retirement accounts.

“If you haven’t looked at it in a while or especially if there has been a change in family dynamics such as a marriage or divorce, review the beneficiary designation on your life insurance and retirement accounts to make sure it reflects your current intentions,” says Bankrate Chief Financial Analyst, Greg McBride, CFA.

Also, check your retirement and bank accounts, insurance policies and other financial accounts to make sure your beneficiary designations are up to date.

10. Look for ways to make money

Sometimes, it’s less about savings and cutting back and more about increasing your income. For instance, starting a side hustle can be a great way to effectively put away more money, pay down debt or even help make ends meet. In fact, a recent Bankrate side hustle survey found that 33 percent of Americans with a side gig said they needed it to pay for living expenses.

Some common side hustles include freelance writing, tutoring, dog-walking, pet-sitting or selling items in an online marketplace. Some people’s side hustles eventually turn into full-time jobs and careers. If you’re looking to start a side gig to make extra money in the coming year, remember New Year’s can be a good time to create goals around starting your own business selling your own skills or goods.

By finding different ways to increase your revenue streams, you aren’t entirely dependent on one income source. Not only can that strategy help you make more money, increase your savings and reach your goals, it can also provide some protection if you lose your primary job.

Frequently asked questions

• How do you create a budget?

  There are a few key steps for making a budget: Start by listing your sources of income, then categorize your expenses into needs (e.g. rent, utilities) and wants (e.g. entertainment, dining out). You’ll also want to have categories for saving and debt repayment. Allocate specific amounts to each spending category based on your income and goals.
  

• What is the 50/30/20 budget rule?

  The 50/30/20 budget rule is a simple guideline for allocating your income. Its framework is that 50 percent of income goes to needs, 30 percent goes to wants and 20 percent goes to savings, ensuring that you prioritize both immediate needs and future financial goals.
  

• What is an emergency fund?

  An emergency fund is a savings buffer set aside for unexpected expenses or financial emergencies. It can help cover unforeseen events such as medical bills, car repairs or job loss. Financial experts generally recommend having three-to-six months’ worth of living expenses in an emergency fund.