It is that time again. Time for us to dream about the better, healthier, and more responsible person we would like to be this coming year. Then, three months from now, we will look back on all the resolutions that we failed to adopt.
What if you could harness the motivation that comes with the New Year to make a long-lasting change to your financial habits? You can! Simply put your resolution on autopilot. Here are three examples:
- Set up an automatic savings plan – Talk to HR about having a small portion of your paycheck go to a savings account instead of your checking account. Regularly building up an emergency fund or a sinking fund for future large expenses can provide a great foundation for your financial planning.
- Save more to your 401(k) – Bump up your retirement savings by 1-2%. A typical target savings percentage is 10-15%, but increasing your percentage dramatically all at once can have a big effect on your take home pay. Start with small increases to ease the impact on your paycheck. Bonus move: some 401(k) plans allow you to set up an automatic increase of your contribution percentage annually.
- Increase your monthly mortgage payment – Contact your mortgage company (or any debt provider) and increase your automatic payment to your mortgage. An advanced move is to set up a bi-weekly mortgage payment that lines up with your bi-weekly paycheck. This creates two smaller payments instead of one larger monthly one. However, the two times each year that you receive a third paycheck in a month, you will be automatically diverting some of that extra paycheck to your mortgage. This small move can shave 6 to 8 years off a 30-year mortgage depending on the interest rate.
Take this time of the year to act on your motivation. Make one right move that will improve your financial condition automatically throughout the course of the year.
If you need help identifying the right move for you, contact one of our advisors.