The beginning of the year is filled with New Year’s resolutions. This year, why not focus on enhancing your financial well-being?

Create a Budget

Spending and saving habits can fluctuate over the years. When was the last time you sat down and created a budget? Even if it has only been a year since you last adjusted your budget, take some time to see if you need to prepare for any big purchases this year, decrease certain areas of spending, or find ways to supplement income.

Creating a budget is a helpful tool in reaching your financial goals. If you plan to buy a house, trade in for a new car, or start a college fund for your children, a well-maintained budget can guide you in allocating your money wisely and show how much progress you are making in preparing for that purchase.

Action step: If you have never created a budget before, start tracking your expenditures for one month and see how your expenses compares to your income. Start building your budget from there! For more information on how to start budgeting, read our Budget Tips blog article.

Build Your Emergency Fund

Without a safety net of savings in your bank account, unplanned bills and emergencies can wreak havoc on your finances. Being able to reach into your emergency fund allows you to avoid the pitfalls of acquiring unexpected debt.

If you want to be prepared for the future, a good rule of thumb is to put away at least three to six months’ worth of expenses. Having a financial buffer allows you to handle unexpected expenses with greater ease and confidence.

Action step: Use Online Banking to set up a recurring transfer from your checking to your savings.

Pay Down Debt

Mortgages, auto loans, credit cards, student loans, and personal loans can all add up very quickly. With varying interest rates and principal amounts, it can feel like a mountain too big to tackle. One strategy to start paying down debt is to practice the snowball method or avalanche method. Keep in mind that each method involves making the minimum payments on each debt monthly.

• The snowball method focuses on paying off your smallest debts first and then reallocating that money to your next highest debt. This method allows you to see progress quickly.
• The avalanche method focuses on paying off your high-interest debts first and then reallocating that money to your next debt with the highest interest rate. This method allows you to save money in the long run by paying less interest.

Not only will paying off your debts reduce the accumulating interest costs, it can also have a positive effect on your credit score!

Action step: Choose one loan this year to focus more efforts on paying off. Use the snowball method by choosing your smallest debt balance or the avalanche method by choosing your highest interest balance.

The start of a new year is the perfect time to reanalyze your spending habits and find the best ways to allocate your money. Consider implementing one of these three resolutions or come up with one on your own that best fits your financial situation.