The New Year Can Give Us an Extra Boost

Many of us spend some time in early January coming up with resolutions and goals – the start of a new year is a transition moment that helps motivate us to start fresh. When it comes to our finances, the same principle applies – we know that there are a few areas that could likely use some improvement, but often the most difficult step is pressing the start button. This article breaks down the most important financial resolutions you can make this year to improve your overall financial health – and we’ll tell you why right now is a great time to make it happen!

There are 365 days every year - why is the beginning of the year such a good time to give yourself a fresh start? The new year is a transition moment, and we can use it to our advantage. It's a moment that can represent an internal reset, like a birthday, a change of season, or the start of a new school semester. Transition moments can boost motivation and confidence, giving people mental permission to separate past versions of themselves from new and improved versions. If this resonates with you, embrace it, and use the new year as a fresh start and to your advantage.

Using tools like UMCU's debt payoff calculator can help you start off the New Year on the right track!What Is a Common Reason Our Finances Don’t Improve? Answer – Complacency.

The “status quo bias” refers to the situation where we prefer things to stay the same, even if we inherently know change will benefit us. The effort of making a decision feels harder than the cost of doing nothing. Also, as humans, we tend to procrastinate and put things off that we know we should do. Some financial examples include:

• Contributing the same amount or percentage to our retirement account each paycheck, rather than bumping it up 1% or 2% every year.
• Staying with the same insurance company rather than shopping around for better rates because you’ve been with them for a long time.
• Not taking advantage of discount and loyalty programs from retailers you frequently use, because “signing up” is required. 

Keeping everything the same doesn’t feel like a decision - but doing nothing is a decision! 

Here Are Some Suggested Resolutions to Help Get You Started

Budget better and commit to being more intentional about your spending.

• A well-designed budget isn't about restriction; it's about empowerment. It gives you a clear picture of where your money is going so you can direct it toward what matters most.
• Add joy to your budget! A realistic spending plan should reflect your personal values, goals, and lifestyle. If the occasional shopping trip or restaurant meal brings you joy and social connection, make space for those meaningful items while finding other areas to reduce spending.
• Check out this free UMCU resource to learn more about money management and get started with a budget template!

Pay down debt to avoid the cost of high interest rates.

• It’s okay to borrow money, but it’s essential we don’t spend beyond our means by using credit. Explore ways to reduce or eliminate your balances by making higher payments each month – your efforts will payoff in the long run. A balance transfer offer from a credit union like UMCU might also open the door for immediate progress. UMCU's debt consolidation calculator is a great tool that shows you how much you can save by consolidating high-interest credit card payments into one convenient payment!

Re-frame savings as a habit, not an event.

• We need to save money consistently throughout the year, and the most effective way to make that happen is by making it automatic. Utilize payroll deductions, or set-up monthly auto transfers from checking to savings. Don’t wait for tax refunds or work bonuses to make a deposit - make savings a regular occurrence. UMCU’s checking and savings accounts make managing money simple and straightforward, with no fees.

In summary, if you want your financial resolutions to stick, you need to make desired actions as easy and automatic as possible. Experts call this "reducing friction." Emotion is another important component. When a behavior is simple and rewarding, it's more likely to become automatic and turn into a habit. Good luck and stick with it – UMCU knows how important financial health is to our members.