Insights

Picture of Ben Joergens New Year’s resolutions are popular with many. They give us a chance to start the year off on a clean slate and motivate us to achieve desired goals. While some may choose to lose weight, eat healthier, etc., we should also consider putting together personal finance resolutions as well!

I often get asked, “What should my resolutions be for the new year?”. While this can vary from household to household, here are my top five personal finance resolutions.

1.Build an emergency fund (if you don’t already have one)
I know you may have heard this before, but it bears repeating. I cannot stress how important having an emergency fund is. This is money you tuck away should something major happen. We saw this firsthand when the pandemic hit. Many had to rely on stimulus to help cover the bills due to a limited savings balance. Experts suggest aiming for 3-6 months’ worth of your monthly bills in this account. I also recommend using digital banking and changing the description from the account number to “Emergency Fund”. When you see this listed, you are less likely to use it for non-emergencies. The best way to build this fund is to have money automatically taken from your paycheck and have it moved directly to this account. Just $20/week adds up to over $1,000 in the savings account each year! Build this in to your budget to make things happen!

2. Prioritize your debt payments
Let’s say you have your emergency fund built up and want to tackle high interest debt. Many people have a goal of getting out of debt, but prioritizing HOW to tackle the debt is key to success. Use this debt sheet to list all of them on paper. Then, look at the interest rate you are paying on each of them. You can get this percentage from your most recent statement. I recommend putting as much as your budget allows to the one with the highest interest rate, while paying minimum payments on the rest. Once you clear the first debt, then take what you were paying on that, and add it to the minimum payment on the 2nd highest interest rate debt, and so on.

You will also want to look at ways to generate more income. Interest rates are currently at historic lows (which is good for debt but not so good for growing savings), so how can you use your money to build wealth over time? You might normally want to pay extra on a loan to reduce debt quickly. But while interest rates remain low, your money could earn a higher return elsewhere and in turn make more money to achieve future financial goals. I recommend talking with a financial advisor to seek opportunities to get your money work for you.

3. Use S.M.A.R.T Goals
Specific, Measurable, Attainable, Result-Oriented and Time Driven Goals are a must! So many people keep great ideas in their head, thoughts that are often forgotten or left to the wayside. I recommend choosing SMART goals and then write them down, ON PAPER (each day would be great). Example: I will take $20 out of each paycheck, put it in a 529 College Savings Account automatically and then take the tax credit I get (annually) for my child and put it in the account as well. Doing so, you are more likely to hit the goal when you lay it out as specifically as possible.

4. Start right away!
Life happens, and things move quickly. I can’t stress how important it is to start these resolutions right away!  The more we delay them, the less likely we are to achieve them. Today is a great time to increase 401K contributions for the new year, pay down credit cards by X amount, shop insurance rates to get the best deal, cut cable and more. Make it happen right away to help you achieve those short- and long-term goals sooner!

5. Work together!
If you are married or in a relationship, work together to achieve your goals. Money and finance issues are one of the biggest contributors to divorce these days. When couples are on the same page with financial goals, they are more likely to make them happen. If you haven’t set goals yet, this is the perfect time to do so. These conversations can be tough at times, and disagreements could take place, but coming together with a compromise is key!

These are just a few of the suggestions you can use in your personal financial playbook in the New Year or anytime and can be a great start to helping you achieve your financial goals!

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Ben is responsible for enhancing Old National financial literacy initiatives by partnering with schools, colleges, universities, businesses, nonprofits and government agencies. In 2017, Ben was recognized by the National Financial Educators Council (NFEC) with its coveted Financial Education Instructor of the Year Award.

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