As you think about what you want to accomplish in the new year, some financial goals might be on your mind. Maybe you want to make this the year you knock out the rest of your student loan debt, pay off your car, or start earning more money.
There are many ways to set and achieve your new-year goals. But with so many ways to improve your financial life, you might be wondering where to start.
This guide can help you hone in on the most important financial goal to hit this year. We’ve put together a list of nine goals you might want to reach in 2018, depending on your current financial situation.
If you still have student loans …
Your student loan debt is probably quite the financial burden. And it costs you a significant amount of money thanks to the interest that grows over time.
Make it your financial goal to pay off at least one student loan this year. And if that’s not possible, you can still make a serious dent in what you owe by taking on one of these strategies to crushing your debt.
1. Pick a method for paying off your balances
Whether it’s the debt snowball or the debt avalanche method, choose a path of repayment when tackling your federal and private student loans.
Depending on which repayment strategy you choose, you’ll aim to either pay off your student loan with the smallest balance or the one with the highest interest rate.
2. Sign up for the right repayment plan
Set a goal to pick a repayment plan that will help you better manage your federal student loan debt.
If that sounds daunting, your goal could be to learn about your repayment options. That way you can later decide whether there’s a program available that could help you.
3. Make extra payments
If you’re paying the minimum on your student loans, consider sticking to a financial goal of making an extra payment every month this year.
You can also increase your current payment by a set dollar amount or percentage. This can help you pay down your loans faster and save you money on interest in the process. You can calculate how much you’d save using our calculator below.
4. Pay off your student loans
If you’re considering big financial goals in 2018, here is a really big one: Pay off every last cent of your student loan debt. A few actions you could take include:
- Cut expenses and put the savings toward your debt.
- Reduce your cost of living by moving to a new location, taking on roommates, or embracing a frugal lifestyle this year.
- Earn more money at your job, work a side hustle, or seek a new position with higher pay.
If you’ve already paid off your debt …
You might not need to focus on student loan repayment in 2018 if you’ve already checked that financial goal off your list. Here are a few more new-year goals you can tackle instead.
5. Max out your retirement account
Whether it’s your 401(k) or an individual retirement account, try increasing your contributions this year and putting in the maximum amount allowed.
Here’s how much you can contribute in 2018 if you’re under the age of 50, according to the IRS:
- 401(k) plans: $18,500
- Traditional and Roth IRAs: $5,500
- SIMPLE IRAs: $12,500
Select your retirement account and divide the maximum contribution allowed by 12. This will show you how much you need to save each month to hit your financial goal by the end of the year.
If that goal sounds too lofty, you can still increase how much you contribute each month.
You might also want to max out your Health Savings Account if you have one. This can be viewed as a retirement account because you can roll over the funds year to year.
If you enter retirement with money in your HSA, you can use those funds tax free for medical expenses. You only need to contribute $3,450 in 2018 to max out an HSA, according to the Society for Human Resource Management. That breaks down to $287.50 per month.
6. Start a wealth-building fund
If you’re already on track with your retirement-related financial goals, look at the years between now and age 68.
You’ll likely want to do a lot of big things with your life before you reach retirement. So, in addition to saving in a 401(k), make sure you’re also investing in accounts you can withdraw from before retirement.
Consider opening a brokerage account and contributing to it regularly. Doing so allows you to build wealth you can use throughout your life, not just when you retire.
7. Build up your emergency savings
Nearly a quarter of Americans wouldn’t be able to cover an emergency expense if it popped up tomorrow, according to a 2017 Bankrate survey.
For your 2018 financial goal, build financial security by adding to your emergency fund.
Your first step is deciding how much you want to keep in your emergency savings. A good rule of thumb is to have three to six months’ worth of income stowed.
Divide this number by 12 to find the amount you need to save each month to reach your new-year goal. Once you have a number, set up automatic transfers to force yourself to save.
If you’re getting ready to graduate from school …
The end of your university years is in sight, and you’re ready to go out into the real world.
Although you might be preparing to celebrate, now’s the time to also think about your financial goals and how to prepare for success. Here are a couple of goals you can start working toward before graduation.
8. Create a budget
You might not know what your income will look like once you land your first job out of college. But you can make conservative estimates and put together a budget while you’re still used to living on a smaller amount of money.
This is especially helpful if you expect to earn a lot more once you graduate.
By keeping your expenses low on your higher income, you can generate more cash flow. From there, you can choose what to do with the extra cash. You can repay your student loans faster, for example.
9. Get a head start on student loan repayment
You want to start repaying your student loans as soon as possible. Create a plan now and know what actions you need to take to stay on track with payments.
The sooner you pick up the habit of sending in that monthly payment, the easier it will be to manage your student loan debt. What you want to avoid is getting used to spending your money on other things.
Start paying off your student loans as soon as possible. Your future self will thank you for not letting growing interest inhibit other financial goals.
Andrew Pentis contributed to this article.
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