Jump-start your financial planning for the new year
Jump-start your financial planning for the new year
The new year is a great time to take stock of your financial situation and make a plan to reach your goals. Here are 3 things you can do to jump-start your annual financial planning.
Pay off debt
Debt comes in many forms—mortgages, college loans, credit cards, and auto loans, to name a few. But one thing remains the same: The interest you pay on your debt can add up quickly, so it's important to plan to pay it off as soon as you can. There are many strategies for paying off debt, but here are 2 common approaches to consider:
- The avalanche method prioritizes paying off your highest-rate debt first while making minimum payments on all your other debts. Once you pay off your highest-rate debt, transfer your payments to your second-highest-rate debt until it's also paid off. Then continue this until you've paid off all your prioritized debts.
- The snowball method involves paying off the lowest balance first while making minimum payments on your remaining debts. After your lowest balance is paid off, allocate your payments to the next lowest balance. Continue this until you've paid off all your balances.
The key is to find what works for you and stick with it.
Build an emergency savings
It's important to have an emergency fund in place to cover unexpected financial hardships, including a job loss, a medical emergency, home repairs, or car troubles. Putting aside at least 3 to 6 months of living expenses is a good rule of thumb. But of course, the more you can save, the better. If you're struggling to get started, begin with a small amount and build up your savings over time. Remember that as little as $50 a month gives you $600 in annual savings.
Make a plan to fund your goals
What are your financial goals for this year? Do you want to save for a down payment on a house, your retirement, or a child's education? Once you know your goals, you can create a plan to fund them. It may involve setting a budget, increasing your income, or investing your money. Mapping out your plan is as easy as asking yourself 5 questions.
Digital Advisor can help
While planning your finances can help you reach your goals, you may not have the time, willingness, or confidence to do it on your own. If you're looking for help, consider letting our robo-advisor—Vanguard Digital Advisor®—do the work for you. Digital Advisor can create a personalized plan based on your financial goals and circumstances, track your progress, and adjust your plan along the way.
Crossing these items off your financial planning checklist will be a great start to a new year!
See what Digital Advisor can do for you.
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