More than half of all Americans plan to make a financial resolution this new year. According to the Motley Fool Money's Financial New Year's Resolution Report, the top goal is to pay off debt.
You can count me among those making financial resolutions in 2026. Here are my top three to inspire you to create your own and hold myself accountable in the coming year.
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A look back at 2025
Last year, my top three financial resolutions were:
- Boost the size of my emergency fund to cover about six months of basic living expenses by the end of 2026.
- Grow my projected annual dividend income by 20% by the end of 2025.
- Increase my passive income from non-dividend investments by 25% by the end of 2025.
This past year didn't go quite how I planned. My wife and I had an emergency right out of the gate, which took a bite out of our emergency fund. It also took us a lot longer to sell our former home. Additionally, we capitalized on an opportunity to refinance the mortgage on our new home, which also allowed my wife to stop working to focus on volunteering. Despite all these unexpected changes, we ultimately achieved our targeted emergency fund goal ahead of schedule. We also reached our non-dividend passive income goal, although we fell slightly short of the dividend target. Overall, we certainly achieved the primary objective of becoming much more financially secure in 2025.
My plan for 2026 is to build on last year's progress toward the ultimate aim of achieving financial independence within the next few years. With that in mind, here are my top three financial resolutions for 2026.
No. 1: Build my investment portfolio's cash position to 10%
The stock market, as measured by the S&P 500, surged another 18% in 2025. Meanwhile, it has skyrocketed more than 80% over the last three years (nearly 22% annualized). As a result, the S&P 500 trades at more than 20 times earnings, significantly above its historical average in the mid-teens over the past quarter-century.
This elevated valuation has led me to become a more conservative investor over the past year. I have been strategically building the cash position across my investment accounts and currently have a nearly 8% allocation to cash. My goal is to increase my cash position to 10% of the value of my stock holdings by the end of 2026 by selling lower-conviction holdings, retaining additional dividend income, and investing a smaller percentage of the cash I transfer into my accounts. This will reduce risk, while giving me more cash to capitalize on a future sell-off.
No. 2: Boost my projected annual dividend income by 25% by the end of 2026
I was only able to increase my projected annual dividend income by about 15% in 2025, which is slightly short of my 20% target. That's mainly due to my strategic decision to increase my cash position over the past year.
While I plan to continue building my cash reserves in 2026, I also want to grow my dividend income. My goal is to boost it by 25% by the end of the year.
I plan to achieve this goal by focusing on investing the cash I don't retain in high-quality, high-yielding dividend stocks. One top holding I plan to continue adding to in 2026 is Realty Income (O +1.07%). The real estate investment trust (REIT) pays a monthly dividend that currently yields 5.7%, well above the S&P 500's average of 1.1%. Realty Income also has a terrific record of increasing its dividend. It has raised its dividend payment 133 times since its public market listing in 1994, growing it at a 4.2% compound annual rate over that time frame. The REIT is in a strong position to continue growing its dividend in 2026 and beyond.
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Key Data Points
Investing more money in high-quality, high-yielding stocks that routinely increase their payouts should enable me to achieve my ambitious goal of growing my dividend income.
No. 3. Boost my non-dividend passive income by 40% in 2026
I was right on target with my goal of growing my passive income from alternative investments by 25% in 2025. The sale of our former home, mortgage refinance, and reaching the emergency fund target freed up additional cash each month that I was able to invest in private real estate, private credit, and other income-generating investments. Additionally, a large non-performing investment made a partial return of capital during the year, which I was able to reinvest in a new income-generating investment.
I've set an even more ambitious target for 2026 to grow my passive income from alternative investments by 40%. It's an achievable goal based on my projected available funds for these investments and the rate I expect to earn. Hitting this goal would help further diversify my income sources, increasing my financial independence.
My goal is to gradually become more independent
In 2025, I wanted to become more financially secure, which I'm happy to have achieved. For 2026, I aim to reduce risk in my portfolio and enhance my financial independence by significantly increasing my passive income. Achieving these 2026 financial resolutions will allow my wife and me to become even more financially free to do more of the things we enjoy.
