With the start of 2025, it’s an opportune moment to set financial resolutions that can enhance your economic well-being throughout the year and beyond. According to the Pew Center Research, three-in-ten Americans made New Year’s resolutions, and 61% of these resolutions were centered around money or finances. Setting clear financial strategies can significantly affect your economic health, especially in a world where unexpected circumstances can catch anyone off-guard. Redlands native Ryan Holloway, an Edward Jones financial advisor with 16 years of experience, suggests actionable steps that anyone can implement to achieve financial stability and growth. Let’s delve into the five essential financial resolutions that Holloway believes can set you on a prosperous path for the upcoming year.
1. Set Clear Financial and Non-Financial Goals
Ryan Holloway emphasizes that goal-setting is crucial for everyone, whether the objectives are financially related or not. Clear goals can act as a roadmap guiding your financial decisions throughout the year. Financial guidance often becomes necessary when striving to achieve these dreams. Holloway asserts that financial advice plays a significant role in reaching your aspirations, and it is important to craft a strategy and develop a comprehensive financial plan tailored to your unique needs and ambitions. Establishing these goals not only provides direction but also helps maintain focus, making it easier to navigate financial challenges.
Creating a strategy involves understanding your financial standing, assessing your income, expenses, debt, and savings, and then setting attainable milestones. A well-thought-out plan should be both realistic and flexible, accommodating life’s unpredictable turns. It’s crucial to revisit these goals periodically and adjust them as necessary. For many, this may involve seeking help from a financial advisor who can provide personalized advice and keep you accountable. Professional guidance can be especially useful when you need to make informed decisions about investments, retirement planning, or debt management. Remember, these resolutions are not just about immediate financial gain but also about setting the foundation for long-term prosperity.
2. Perform a Financial Checkup
Regular financial checkups can be as important as regular health checkups. Holloway recommends that everyone should establish a solid budget and create an emergency fund covering 3-6 months of living expenses. This practice can provide a safety net in case of unexpected events such as job loss, medical emergencies, or other crises. A financial checkup should align savings habits with both personal and family goals to ensure that financial health is maintained over the long term. Such ongoing assessments help track progress and pinpoint areas that need attention.
Holloway suggests taking time to thoroughly understand your budget, debt, emergency fund, and retirement accounts. This knowledge can empower you to make informed decisions, identify unnecessary expenses, and redirect funds toward debt reduction or savings growth. Regular financial reviews can reveal hidden financial inefficiencies, such as high interest rates on loans or suboptimal investment choices, which, when addressed, can result in substantial savings and better investment returns. Implementing regular checkups involves looking at your financial statements, assessing your income and expenditures, and ensuring that your financial practices are in line with your overall life goals.
3. Save First, Then Spend
When it comes to financial discipline, prioritizing savings over expenditure is a fundamental principle. Holloway strongly advocates for making saving a top priority, treating it with the same importance as essential expenses like housing, food, and clothing. This approach entails putting money into savings accounts or retirement funds as soon as you receive your income, ensuring that your financial future is secure before considering discretionary spending. By adopting this mindset, you are more likely to protect yourself from financial pitfalls and build a robust financial cushion.
Saving first helps inculcate disciplined financial habits and creates a financial buffer that can provide peace of mind. It also aids in wealth accumulation over time, enabling greater financial freedom and less reliance on credit or loans. Experts suggest automating savings to eliminate the temptation of spending money before saving it. This can be achieved through automatic transfers from checking to savings accounts or payroll deductions directly into retirement plans. Such systems ensure consistency, reduce the likelihood of missed savings opportunities, and help maintain a disciplined approach to managing finances.
4. Develop a Plan to Tackle Debt
Debt reduction is a critical component of financial health. Holloway advises viewing debt repayment as a gradual yet persistent process. High-interest loans can significantly hamper financial progress, so refinancing these loans or adopting debt reduction strategies, such as the debt snowball or debt avalanche approach, can be effective. The debt snowball method involves paying off debts from smallest to largest, boosting motivation by quickly reducing the number of creditors. Contrarily, the debt avalanche method focuses on paying off high-interest debt first, which can save money on interest payments in the long term.
Both methods have their merits and can be chosen based on individual financial situations and preferences. The key is to remain consistent and focused on debt repayment, celebrating small wins to stay motivated. Once a debt is paid off, redirecting those payments towards the next debt can expedite the repayment process. Creating a clear, actionable debt management plan involves listing all debts, determining minimum and extra payments, and sticking to the repayment goals. Engaging with financial advisors or credit counselors can also provide additional strategies and support to effectively manage and reduce debt over time.
5. Work with a Financial Advisor for Professional Guidance
Regular financial checkups are as crucial as regular health checkups. According to Holloway, everyone should have a solid budget and an emergency fund covering 3-6 months of living expenses. This safety net is vital for unexpected events like job loss, medical emergencies, or other crises. A financial checkup must align savings habits with personal and family goals to maintain long-term financial health. Ongoing assessments help track progress and identify areas needing attention.
Holloway advises understanding your budget, debt, emergency fund, and retirement accounts. This awareness empowers you to make informed decisions, spot unnecessary expenses, and redirect funds to pay down debt or increase savings. Regular financial reviews can uncover hidden inefficiencies, such as high loan interest rates or poor investment choices, which can be corrected for significant savings and better returns. Implementing regular checkups involves reviewing your financial statements, assessing your income and expenses, and ensuring your financial habits align with your overall life goals. Through these practices, you can achieve a more secure and prosperous financial future.
