It’s New Year’s Resolution time. If you are still on the fence about making a resolution, then pick up a pen (or your smartphone) and go for it. Just because past resolutions might not have worked out exactly as planned, that doesn’t mean Jan. 1 isn’t as good a day as any to embark on a journey of self-improvement.
So, now which resolution to set? I have one simple piece of advice: make money resolutions. Here’s what I know: we women don’t think about money as much as men do, and it is costing us a literal fortune over the course of our lives.
It’s time to change that. “Taking control of your money is probably the most important thing you can do and the best gift you can give yourself,” says Sallie Krawcheck, Co-Founder, and CEO of Ellevest, an automated investment platform for women.
We all want to live a happier, healthier life, and investing towards greater financial security is a key path to achieving your major life goals. Just like having a mentor at work to keep you motivated and focused in the workplace, it’s important that by the time you turn 30, you should have grown-up goals that will set you up for a successful financial future for years to come.
Below, Krawcheck rounds up five money resolutions every 20 and 30-something should aim to achieve.
1. TAKE ADVANTAGE OF WORK PERKS
You work hard and in return your work gifts you with some pretty awesome perks. If your company offers a 401(k) retirement fund and a match, you should 100% be taking advantage of it.
“But, why? Can’t I keep the money and save it,” you may be asking. Because a 401(k) allows you to invest pre-tax earnings, which saves your tax bill in the long run. Your work is essentially dropping dollars into your retirement account before they hit your paycheck, and this might even mean matching your contributions (bonus points).
Have an old 401(k) from a previous employer that is languishing somewhere? Roll that over to Ellevest right away, because they now offer 401(k) rollovers as well as IRA transfers. It’s super simple and they’ll even make a personalized recommendation regarding whether rolling over your 401(k) to Ellevest is in your best interests. The best part? Ellevest will help you with the rollover process and charges no additional fees to rollover your 401(k). Put your 401(k)s in one place: an Ellevest retirement account.
“Our grandmothers used to call it “Mad Money”; we call it the F.U. Fund,” says Krawcheck. Simply put, it’s extra cash to make sure you have enough to cover your needs if you say to get laid off, break up with your long-term boyfriend and need to move quickly, or any other emergency. This fund should be 3 to 6 months of take-home pay in cash so that it’s easily accessible. (Note: Ellevest offers an easy to access Emergency Fund Goal) But remember: do not start an emergency fund if you have credit card debt — pay that down first.
3. MASTER YOUR DEBT
If you’re in debt don’t be too hard on yourself. Most of us have been in some form of debt, whether that is student loans, mortgages, or credit card debt. The good news is you won’t be drowning in debt for long if you make it a priority to pay it off in 2018. The sooner you pay off your debt the sooner your credit score will increase, and all the more smiles you will have on your face.
4. BUDGET LIKE YOU MEAN IT
Stick to your budget like how you’re going to stick to this new year’s resolution. You may have splurged or gone a little overboard this year, so take the time now to evaluate your budget plan for 2018.
A good start is sticking with the 50/30/20 rule: 50% for essentials, 30% for desires, and 20% for investing. Krawcheck believes that one strategy to fire up your budget is to pay yourself. This means investing a small amount of your after-tax salary every month through an automated deposit. Doing this will help you resist the urge to spend this money. But before you take this step make sure you are debt free and have set up an emergency fund.
5. BE A MONEY BOSS
“Build wealth like a boss.” This is the big resolution where you make a plan. According to Krawcheck, building wealth may sound unattainable; but instead of thinking about building loads of money, think about building money towards your future goals — i.e. going on that dream vacation to France, buying that dream house, or simply feeling like you’re “doing it right” and putting your money to work.
While saving money is great, it’s not enough. Why? Because the money that’s invested has the opportunity to earn more money thanks to compounding. So, when you invest, you’re setting yourself up for the potential to earn a lot more money (and we do mean a lot).