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We may be a couple months into 2020, but that doesn’t mean you can’t still seriously plan for the rest of the year. As you look ahead to the Spring and Summer, it’s all the more important to get serious about your financial goals before the Holiday season in Fall and Winter sets in. In this post, we’ll discuss the 5 simple financial goals that everyone should set as they head into the year. Some may seem simple, others challenging; either way, it’s important to know your goals so you can act accordingly.

 

Read through to find out what goals are smart to set for 2020, as well as the steps you can take to make those goals into a reality.

Make a budget and stick to it

The first financial goal — the one that pretty much all the others depend on — is making a budget. Maintaining an actively managed budget is key if you want to have control over your finances. If you spend each month buying things without keeping track, then just praying that when your credit card bill comes it’s not too bad, you’re probably going to have a hard time keeping your head above water.

Instead, try using the 50/20/30 budget. This simple financial tool is handy for those who are just starting out budgeting and aren’t sure how they can best organize things. Basically, it works like this:

 

  • 50% of your budget should be spent on necessities. That means rent, car payments, groceries, and medical payments. 
  • 20% of your budget should be put toward savings and debt repayment
  • 30% of your budget can be spent on whatever you like — this is the part you get to have fun with!

 

An easy way to start is to print out your last credit card bill and bank statement, and, with three highlighters, organize your expenses into these categories. If they don’t add up to the 50/20/30 budget, it’s time to change up your spending habits.

Start an emergency savings

It’s just a fact of life: emergencies happen. Whether that’s your pet getting sick, a relative passing away, or an unexpected medical bill, there’s a chance you’ll have to spend some serious cash on an emergency in your lifetime. No matter if you eat well and exercise, you can still get sick. You may also lose your job, in which case you may have to pay for expenses straight from your savings account.

 

In order to prepare for that, it’s good to have emergency savings. One rule of thumb that many financial planners suggest is to have between 3 and 6 months worth of income put away for a rainy day. 

Prioritize paying off debt

It’s no fun having a massive amount of debt following you around. It can feel like your entire financial future is dependent on getting the load off your back. So, in order to relieve that burden, it’s important to prioritize paying off debt. Remember the 50/20/30 budget from earlier? If you do have student debt, credit card debt, or some other loan you need to pay off, 20% of your budget can be allocated toward that.

 

Real estate expert and founder of Texas Hard Money Loans Sacha Ferrandi advises, “Make sure you’re extremely dedicated to paying off your debt. Taking out loans should be done responsibly and with the intent of making on-time payments. It can be easy to fall into a habit of making a payment late or skipping a payment every once in a while. Don’t fall into this way of thinking as it can severely damage your credit score.”

 

It’s a tricky balance making sure that you’re putting away some money for emergencies while still paying debt. But, one way to arrange this is to have an autopay set up with your loan company. See if you can automatically contribute, say, 200 toward paying down your student loan. Then, whatever is left over from that portion of your budget, put away in emergency savings. 

Start to build up your credit score

One of the huge benefits of consistently paying down debt is that you can start to improve your credit score. What’s a credit score? Basically, it’s a measure of how trustworthy of a borrower financial institutions consider you to be. It ranges between 300 and 850, and the higher the score, the more likely you are to be approved for a loan — and the lower your interest rate is expected to be.

 

By paying down your debts and consistently making payments on time, you start to look like someone who is responsible with borrowed money. That means that when you’re ready to upgrade your car, put down roots and buy a home, or even take out a loan for a wedding, you’ll pay less in interest. Having strong credit can take years, especially if you’ve fallen pretty deep in the hole. However, you can start right away by prioritizing debt repayment. 

Consider investment opportunities

Lastly, once you’ve got your debts and emergency savings squared away, you may want to start considering investment opportunities. No, you don’t have to be a stock market gambler to make money through investing. There are sensible, lower-risk ways that your average consumer can benefit from investment products. Curious about how to start investing? Consider these options:

  • Robo-advisors are rapidly growing in popularity. You can set up an account with a company like Betterment, Wealthsimple, or Ally, and an algorithm will build you a stock portfolio suited to your goals and preferences. They’re pretty intuitive to use, making them a great option for new investors.
  • Index funds are another great way to start investing. These funds spread your money out across an entire market index — basically, a huge collection of companies — so you’re less likely to lose money if one fails.
  • Retirement accounts, like IRAs and 401ks, are an absolute must for young investors. These are generally lower-risk, so you can build up your retirement savings over time. Remember, slow and steady wins the race. 

 

Make 2020 the year you finally conquer your personal finances by setting these 5 simple and responsible goals!

 

Author Bio

Samantha Rupp holds a Bachelor of Science in Business Administration. She is a contributing editor for 365businesstips.com as well as runs a personal blog, sjruppy.com. She lives in San Diego, California and enjoys spending time on the beach, reading up on current industry trends, and traveling.

 

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