ByKurt Smith, Psy. D.
Learn more about Kurton NerdWallet’s Ask An Advisor
The beginning of the new year is the perfect time to reflect on the past and look forward to the future. It’s also a good time to set goals in your personal, physical, emotional and financial life. What better time to look ahead and think of how you want your finances to change in the coming year?
Still, for manypeople money isn’t a pleasant topic, and so they often avoid it. Somepeople will put off thinking about money until taxes are due in April. If that’s you, force yourself to push past the discomfort and keep reading.
You may not be able to change your income, but you can choose how you spend and save your money, which will greatly affectyour financial future. Making a few simple decisions now can set you up for success and put you where you want to be financially down the road.
Here are five financial goals to consider setting in 2017. Pick a few or pick them all. Either way, you’ll be on the pathto a better financial picture this time next year.Set a budget
Knowing where and how you’re spending your money is the first step to getting your finances in order. Start a simple spreadsheet that lists all your expenses along with your net income, or use a budgeting app like Mint. Once you know your income and expenses, you can set up a financial plan for your spending. Look for ways to paredown your variable expenses — costs that aren’t fixed — so you fit in funds for savings and retirement.
>> MORE: How to build a budgetInvest in your 401(k) or an IRA
If your employer offers a 401(k), you should certainly take advantage of it. 401(k)s and individual retirement accounts are great, because the amount you contribute can be excluded from your taxable income. Many employers will match your 401(k) contribution, up to a certain percentage, which doubles your contribution each time. Your account will grow over time not just from your contributions but also by the compounding growth of the investments you choose. Most 401(k) plans will allow you to start with even a small amount, such as 3%of your income.Increase your 401(k) or IRA contribution
If you’re already contributing to your company’s 401(k), bravo! Now, increase the amount you contribute by a percentage point or two. Use the same approach for an IRA. You probably won’t miss the small percentage when you get your paycheck each time, and saving that extra little bit will add up in the long run. If your employer offers a match, try to increase your contribution to at least meet thatmatch so you reap the full benefits the company is offering. This means if the company offers up to a 6% match, be sure to make your contribution 6%.Pay off your debt
Getting out of debt will mean you’ll have more money to contribute to saving for your future and, ultimately, more financial freedom. No matter how much debt you have, you have tostart somewhere to begin to pay it off. One strategy is to focus first on the smaller debts you may have, such as credit card balances, which also may have relatively high interest rates. Pay those off first, and then you’ll be more energized and ready to tackle anylarger debts, such as car or student loans. The less money you have tied up in debt, the more money you’ll have to save and spend as you wish.Start an emergency fund
Having an emergency fund can offer financial relief and peace of mind in tough situations. If you need to replace a home appliance suddenly, get your car fixed or handle some other financial circumstance that life throwsyour way, you’ll be prepared. Start by setting a goal of saving $1,000 in your emergency fund. Even if you put just $84 a month into an account, you’ll reach your goal within the year. If you need to dip into the account for an emergency, just make sure to replenish that amount.
The topic of finances makes some people anxious, while others get mad. If setting financial goals requires you to talkwith a partner, be on guard for finger-pointing, blaming and anger to arise in your relationship.
No matter what stage of life you’re in, you can start making financial goals. Whether you are graduating from college soon or getting ready to retire, planning will help set you up for financial success. Planning also helps lessen the mental and emotional burden that ignored finances bring. It’s never too late to get started, so pick one or all of the goals listed above and start setting yourself up for your best money year yet.