5 Ways to Get Financially Fit in the New Year

A man smiles while looking down at his phone and sitting at his dining room table

The new year brings a chance for reflection on what has come and gone. Whether you’re an enthusiastic fan of new year’s resolutions or someone who shies away from them, it’s worth taking some time to evaluate your current goals at the beginning of the year.

Lay groundwork for a positive year by not only looking at your physical and mental health, but your financial health, too. Even if you feel like you’re in a good place with your money, you should ask yourself how your family would fare if something happened to you. Would you leave your loved ones with enough money to maintain their standard of living?

Let’s take a look at how you can get fit for the financial new year.

1. Examine your financial goals.

What are your financial goals for the near future? What about five years from now? Sit down and write a list of things you’d like to accomplish financially, sort of like a financial check-up. This can include anything ranging from a long-awaited vacation or a major purchase such as a new vehicle or your first home. Ask questions about whether or not you’re on track or if your investment strategy needs work.

The best way to answer these questions is to seek advice from a trusted financial advisor or planner. If you’ve never worked with a financial planner before, it’s recommended that you seek out a fiduciary. A fiduciary is a type of financial planner who manages money or property for you, but with the added stipulation that they do so for your benefit alone.

2. Create a (realistic) budget.

Budgeting is one of the most important steps you can take toward when looking at your finances and improving your financial health. A budget can take different forms, from a spreadsheet to a list, but it shows you how much money you make and how you spend that money.

Although dollar amounts will vary based on your living situation, your budget should include, at minimum, the following:

  • Housing costs
  • Necessary utilities
  • Food
  • Miscellaneous expenses

List your current spending habits and bills to get an idea of how to build your budget. Don’t exclude streaming services, internet or TV, or fast food purchases just because you feel guilty. Understanding exactly where each dollar goes will help you determine what you should cut from your budget to help reach the goals you listed in the first step. 

If you don’t want to manually add items to a spreadsheet, there are budget apps and services that can help you optimize your spending to meet your goals.

3. Deal with debt.

Now it’s time to make a plan for eliminating debt, whether it’s your home mortgage, car loan, student loans, or credit card balances. There’s no shortage of methods for paying down debt, from the “snowball method” that involves paying larger balances down first to attacking debt with the highest interest rate. Find a method that works for you and stick to it.

While you work to pay down debt, a good rule of thumb is to avoid adding to it; stop using credit cards you’re actively trying to pay off and don’t open new accounts if you can help it.

4. Start saving for retirement.

Even if you’re paying down debt, it’s still important to make some space in your budget for retirement savings. Take advantage if your employer offers a 401(k) match or other retirement benefits. Your financial advisor can help lay out additional retirement options, whether that involves a Roth IRA, diversified investment portfolios, or even a simple savings account.

One tool you may not have considered as an investment option? A permanent life insurance policy that collects cash value. When you pay the premiums on permanent life insurance, a portion of the premium goes into an account that grows at a specified rate. Permanent life insurance policies allow you to borrow funds from the cash value of your policy to help pay for financial needs.

5. Create an emergency plan—including life insurance.

No matter how healthy your finances are, it’s a good idea to create an emergency plan. Financial emergency plans can include a “rainy day” fund or a savings account exclusively dedicated to pay for the unexpected crises that come with life, such as car repairs, home repairs, unexpected accidents and other expenses.

In addition to a basic emergency fund, consider what would happen if you were to suddenly pass away due to an accident or illness. A life insurance policy can help provide a financial cushion for your loved ones. It could also help them with any final expenses, including paying outstanding debts or providing for future costs, such as a college education. Life insurance can even replace your income for your family for a period of time.

Term life insurance is an affordable option that you can purchase for periods ranging from five to 30 years. Because life insurance tends to be cheaper when purchased earlier, buying it today can help set you up for financial protection even 20 years down the road. Whole life insurance—permanent life insurance that covers you from now until you die—is an option that costs more but removes much of the guesswork from purchasing insurance.

However you choose to plan for financial emergencies, you can trust that your life insurance policy will be there to offer protection for your loved ones down the road.

SelectQuote can help you shop for life insurance to meet your financial goals.

Life insurance is a vital piece of the puzzle when taking stock of your financial health whether you’re just starting your career or are on the verge of retirement in 2022. If you need help finding a life insurance policy to meet your needs, SelectQuote is here to help. 

We can guide you through the process of shopping and applying for life insurance. That includes comparing rates from different life insurance companies to help find something to meet your budget and coverage needs. Let SelectQuote shop for a life insurance policy and save you time and money with a free quote.

We do the shopping. You do the saving.