3 days Ago
So you want to get your financial life in order. And you swear that 2025 will be the year you do it. In fact, you’re making it your new year’s resolution.
It’s a fine idea. No, really. It is.
But you might meet with more success by not making such a sweeping, vague promise to yourself. Instead, resolve to do just one or two specific things that will start to improve your financial life. Aiming high is great, but focusing on a few manageable steps toward a concrete goal is more likely to get you where you want to go.
Why? Because once you achieve those smaller to-dos, you’re more likely to build on the momentum. So here are some more specific goals to choose from — and simple steps you can take to meet them. Pay down debt Step 1: Figure out what you owe.
“People’s big mistake is that they don’t know what they owe because they’re too afraid to look. Fear makes the wolf bigger than it is,” said personal finance educator Tiffany Aliche, founder of TheBudgetnista.com.
If this is you, find yourself an accountability partner, preferably a non-judgy one, like a good friend. And let that person review your statements — maybe even read them out loud to you. Then write down the following: Who do you owe? How much do you owe them? What’s the interest rate? What’s the status of your account (e.
g., When are payments due? Have you missed any? What are the penalties?) Step 2: Pick a pay-down strategy that best suits you. Aliche offers three options to choose from: The snowball, the avalanche and the blizzard.
With the snowball strategy, you list your debts from lowest to highest, and commit to pay the minimum on all but the smallest one. That’s the debt you will aim to pay off first by consistently paying more than the minimum owed. Once it is paid off, take the payments you had been applying to that small debt and apply them to your second-lowest debt.
Then repeat the same pattern until all your debts are cleared. With the avalanche strategy, list your debts in order of highest to lowest interest rates. Again, commit to pay at least the minimum owed on all of them except for your highest-rate debt.
That’s the debt you will pay off first. Once that’s done, apply the payments you’d been making on that one to your debt with the second highest rate. And so on.
Using the blizzard strategy, you list your debts by how much stress they cause you. Your goal is first to pay down the debt that stresses you out the most — say, a loan from a family member if it’s getting in the way of your relationship. “Most people are snowball people,” Aliche said.
“And then they switch to avalanche.” Or, she said, if stress is your thing, you might start with blizzard, then move to snowball and finish with avalanche. Make more money Increasing your income is everyone’s favorite idea.
Your best starting place is your current job. “Create a brag book or what you might call a Go-Me File,” Aliche said. Use it to write down your accomplishments, and the accolades you get from others at work or from clients.
Then quantify how your efforts on the job made or saved the company money. This will build your case for why you deserve a raise. “You’re not asking for more money.
You’re displaying your value,” Aliche said, noting that you’re showing your managers what the company will lose if you leave. Say you’ve generated or saved $50,000 to $100,000. That is the context in which you put your request for a $5,000 to $10,000 raise.
In this way, your manager is more likely to conclude they ought to pay you more, she said. If you get turned down, you now have a great resource to use on your job hunt, which might take several months. Another way to make extra money in 2025 is to identify what Aliche calls your “pocket-size hustle” — which is something you can pull out of your pocket when needed.
It’s either related to what you’re currently doing or to something in which you have a degree or license so you can charge more, she explained. For example, when she was a full-time teacher, she would babysit and tutor for extra cash. Curb spending and save more It’s usually hard to save more money unless you find ways to spend less of it.
If you don’t like the idea of making a budget, set up guardrails that will make it easy to pay your bills, make it hard to overspend and make it possible to set aside necessary savings. This is what Aliche terms the “split it before you get it” strategy. After setting aside some pretax earnings to go into your 401(k) — ideally, enough to get your employer’s full match — have your payroll department automatically deposit your after-tax money into four different accounts.
Bill-paying checking account: The first slice goes into a no-cost checking account that is strictly used to automatically pay your recurring monthly expenses, like housing, utilities and child care plus whatever recurring debt payments you have set up from the debt section above. Do not have a debit card for this account. “ You don’t want to accidentally swipe your card and use your bill money,” Aliche said.
For surprise bills that come up, you might commit to a given day in the month (eg, the third Thursday or the 15th) to manually pay them, and if need be, transfer money into that account from your savings to cover them. Debit-card account: The next portion of your paycheck gets automatically deposited into a second checking account, which will serve as your debit card account from which you will draw money for everyday cash purchases. Emergency savings account: The third account should be an online high-yield savings account for your emergency fund money, with the goal of having at least three to six months’ worth of living expenses.
Savings goals account: Then direct the rest of your paycheck to another online high-yield savings account that is earmarked for goals you want to reach in the next one to five years — such as a big trip or a down payment. Take it slow If you’re not sure where to start — or just not sure how to attack something that is not on this list but is important to you (e.g.
, coming up with an estate plan), here are a few ways to move in the right direction in the first quarter of the new year: Take baby steps: To make progress toward any financial goal, commit to spending as little as an hour every week or even every month on it, said certified financial planner Jaime Eckels, a partner at Plante Moran Financial Advisors. In between those times, observe and write down your financial behaviors or worries. For example, Eckels said, pay attention when you go to a store like Target.
Do you always go in for one or two things but come out with four or five others that aren’t essential? What financial concerns, if any, have been gnawing at you and does anything specific trigger that feeling? Write down what you want: Deciding what’s important to you, and writing down a goal, as well as steps and deadlines to move you toward achieving it, can help motivate you to stay on track once you get started. Ask for help: “If you don’t know what you need to do and don’t know how to prioritize, get help. Find a family member or friend to help you get your arms around what needs to be done,” Eckels said.
Indeed, when it comes to accomplishing most financial goals, “Accountability is the true hack,” said Aliche, who is running a free Get Good with Money Challenge , a week-long online event starting January 6. And don’t be afraid to seek help from a lawyer or accountant if there are legal or tax issues you don’t understand. But be sure to write your questions in advance, Eckels advised, so you get what you need and don’t have to pay for their time while you come up with all your questions on the spot.
Reward yourself: Whatever financial goals you decide to address in 2025, be sure to celebrate the small wins along the way, Eckels said. “Set a reward for yourself – a small something that’s meaningful.” Which for some people actually might be that cute little thing from Target.
Who’s to say?.
