A new year means a new opportunity to take control of your finances, and thankfully, a large number of Americans intend to do just that. Nearly one-third of U.S. adults are planning to uphold at least one financial resolution for the year ahead, according to Fidelity Investments, and an impressive three-quarters of Americans think they'll be better off financially in the coming year than they were in 2018.
If you want to see your financial standing improve in 2019, it's going to require some effort on your part. Here are a few key steps you can take to make it happen.
1. Follow a budget
To get to a more solid place financially, you'll need to really understand where your money is going. And that's where following a budget comes in. Without one, you'll have a hard time analyzing your spending and identifying ways to cut corners if necessary to free up more cash for savings.
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If you're currently without a budget, carve out an hour or so to create one. The most time-consuming part of the process will involve going through your bank and credit card statements from the past year to see how much you've been spending across various categories, but once you have a good sense of what those numbers should look like, you can enter them into a spreadsheet and see how your total monthly spending compares to your earnings. If you don't like what you see -- meaning, there's not much room for savings -- you can then go back through your budget and start finding ways to reduce expenses that come with wiggle room, like groceries and leisure.
2. Automate your savings
Many of us have the best intentions when it comes to saving money, but then life's many temptations get in the way. Boosting your savings is a good way to close out 2019 in a stronger place financially, so if you're serious about doing so, make a point of paying yourself first.
You can accomplish this in a number of ways. First, if you're lacking in short-term savings, you can set up an automatic transfer to your bank account so that a specified amount from each paycheck lands there off the bat. If you're good on near-term savings but want to focus on retirement, sign up for your company's 401(k) and direct a portion of your earnings to that account. (If you opt for a traditional 401(k), that money will go in on a pre-tax basis. If you save in a Roth 401(k), your contributions will be post-tax.) And if your employer doesn't sponsor a retirement plan, find an IRA that allows for automatic transfers and save for your golden years in there. The benefit of automating your savings is removing the option to spend whatever money you arrange to disappear, thus helping yourself meet other important goals.
3. Ramp up your retirement plan contributions
If you're already in the habit of funding an IRA or 401(k), you know you're doing your part to buy yourself some financial security during your golden years. But unless you're currently maxing out one of those accounts, it never hurts to aim to do better.
Beginning in 2019, workers under 50 will have the option to save up to $19,000 a year in a 401(k), and $6,000 in an IRA. For workers 50 and over, these limits are $25,000 and $7,000, respectively. Even if you can't max out, saving more next year than what did over the past year could work wonders for your nest egg.
Imagine you start saving $100 more each month, or $1,200 more a year, for retirement beginning in 2019, and you're aiming to retire in 2039. If that extra money grows at an average rate of 7% a year, after 20 years, you'll have boosted your nest egg by over $49,000 on top of what you were already saving.
4. Stay out of unhealthy debt
It's one thing to buy a home and take on debt in the form of a mortgage, or finance a vehicle so you can function and get to work. But credit card debt is a whole other story, and if you want to end 2019 in a better place financially than you are at present, you'll need to make an effort to stay away from it.
In this regard, having a fully loaded emergency fund can really help. By socking away three to six months' worth of living expenses in the bank, you'll most likely be covered when a major unplanned expense comes your way, and you won't be forced to resort to credit card debt. Having that cushion can also serve as protection in the face of unemployment -- because while the job market is healthy today, there's no telling what it will look like by this time next year.
Will your finances improve in 2019? If you make an effort to stick to a budget, automate your savings, boost your retirement plan contributions, and steer clear of debt, they just might.
