Did you make any New Year's resolutions? It's the perfect time to add some financial goals that can set you up for success this year.
Most financial resolutions fall into three broad categories: saving more, paying down debt and spending less. The key is turning those broad objectives into specific, measurable actions, according to Jill Schlesinger, CBS News business analyst.
"So instead of saying save more, it might be, 'Hey, I'm going to put an extra 1% into my company retirement plan. Or maybe I'm going to put an extra $25 per pay period into my emergency reserve fund,'" Schlesinger said on KCBS Radio. "Concrete is the way to try to actually reach a goal as opposed to this amorphous, 'I'm going to be better with my money and save more.' That's kind of meaningless."
By setting measurable targets, you're far more likely to stay on track and achieve your financial goals. Schlesinger also highlighted the importance of addressing both short-term and long-term financial needs. For example, when it comes to saving for emergencies, your first goal should be to establish a fund that covers six to 12 months of living expenses. While that can feel daunting, Schlesinger suggests starting small and steadily building over time.
Another place where small steps can lead to big gains is saving for retirement.
"If you work in a company that has a plan, make sure that you're using it at least up to the company match. If you're opening up your own retirement plan, maybe a Roth IRA, you try to put in just a little bit, you don't have to get to the max immediately," Schlesinger said.
In addition to saving and planning for retirement, paying down debt should be a key focus for those with outstanding balances, especially high-interest debt like credit card balances.
"A small amount extra every month is where you start. You're not going to get rid of it all at once. Things build up over time, but you're trying to allocate a certain amount of every month of that highest interest debt to really get a foothold into paying it down," Schlesinger said.
While many people aim to spend less in the new year, truly understanding your cash flow is crucial to achieving long-term financial success.
"You know what all these goals have in common? They require that you understand the money that's coming in and going out. And I think that that's the part that people don't like," Schlesinger said. "I do think you need to understand the cash flow of your household. How much money are you making? What's coming in? What are you spending?"
"All these things are really helpful ways to get your -- honestly, just to get your small step created here in the month of January," she added.
If you need help managing your cash flow, financial tracking apps like PocketGuard, GoodBudget and Honeydew offer free versions that can help monitor your spending, set savings goals and gain a clearer picture of your financial habits without the need for a complex budgeting system.
Even if you just use pen and paper or create a spreadsheet to track your money, Schlesinger said the key is to identify your spending patterns and find areas where you can make adjustments to better meet your financial goals.