Wealth Management | U.S. Bank

5 basic financial goals for the new year

Use this sampling of goals to help you take control of your finances.

Tags: Debt, Goals, Investing, Lifestyle, Planning, Savings, Wealth, Be prepared
Published: January 21, 2020

The beginning of the year is great time to get your finances in shape. Here are five basic goals to get you started.

 

1. Get organized

If you’re not already doing so, tracking your spending is a good first step in taking control of your finances. You might be surprised to see how much you’re spending on both your fixed (essential) and discretionary expenses every month.

Once you know what your expenses are, stay on top of tracking them by putting a budget in place. You could use a spreadsheet, your bank’s online or mobile app or other budgeting app to monitor your expenses and build out your goals. A good rule of thumb is to keep essential spending at 50 percent of your income, discretionary spending at 30 percent and save the remaining 20 percent.

 

2. Establish a monthly emergency fund

Establishing an emergency fund is critical to ensuring your financial plan doesn’t veer off track if/when something unexpected comes up. This type of goal is a need and should be prioritized.

Ideally your emergency fund has enough to cover three- to six-month’s worth of daily expenses. Determine your overall target, and figure out how much you can allocate each month to help you get there. Then, set up an automatic deposit to a designated savings account. You could even consider opening a money market savings account to take advantage of the higher interest rate compared to a standard savings account.

Achieving this goal may help you be better prepared to pay your bills and other necessities if an unexpected event happens. 

 

3. Choose a strategy for paying down debt

Having a lot of high-interest debt can get in the way of your financial goals. The average American under the age of 35 has around $67,000 in debt1 in the form of mortgages, student loans and credit card balances.

Consider developing a debt strategy for the year. For example:

  • Focus on paying down accounts with a high interest rate first (credit cards, for instance).
  • Pay off a little more than the minimum balance each month.
  • You may want to look into consolidating your debt, which allows you to pay your debts in one monthly payment rather than keeping track of multiple due dates and interest rates. 2

 

4. Upgrade your investing contributions

Whether you’re just starting to invest or want to make some changes to your portfolio, it’s important to incorporate an investing strategy into your yearly financial plan.

Determine how much you can invest, and which accounts those contributions will go to:

  • Start by contributing to an employer retirement account, if one is offered. If you’re already contributing, increase the percentage if you can.
  • If you have an HSA, consider maxing out your contribution. HSAs allow you to pay for qualified medical expenses pre- and post-retirement. The money you invest in an HSA is tax-deferred and it can be used tax-free.
  • If you have children, consider opening and/or contributing to a 529 plan. Once after-tax dollars are put into this education fund, any gains are tax-deferred and funds can be used tax-free when applied to qualified education costs.

 

5. Save for something special

Saving up for something fun, such as a vacation or a new car, can be a great goal to keep you motivated.

To ensure you reach it, you can set up:

  • A target date timeline for achieving your savings goal.
  • An amount to set aside from each paycheck or each month.
  • Where to keep those funds.

Opting for direct deposit to a separate savings account is one good way of making sure you stay on track to reach your goal. Once you’ve started on this goal, you can make it a long-term habit. Just check in regularly to ensure your wish doesn’t interfere with your financial priorities.

 

Want to keep building your financial goals? Take this financial fitness quiz to find out where you’re at and what you can do to get to the next level.

 

1This Is How Much Debt the Average American Has Now—at Every Age,” Money, April 13, 2018.
2What is debt consolidation, and should I consolidate?,” NerdWallet, July 20, 2018.