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Smart Savings Tips to Prepare Financially for the New Year

The start of a new year is upon us. What a great time to give yourself a fresh start and boost your savings.

Here are some tips to help you reach your goals in the new year.

1. Understand the Big Picture

Where do you stand when it comes to your overall credit, savings and debt picture? It helps to know where you stand before setting your goals. To measure your overall credit health, look at your credit score. This will help you plan for the future with confidence.

2. Track your Monthly Spending

Get a handle on your spending. Each month, track all of your expenses – everything from the $4 coffee to the monthly mortgage payment. At month’s end, tally up your spending. Does it meet or exceed your budget? Cut back in the areas you can and move the excess into a high-yield savings account. You can also use it to pay down debt.

3. List your Financial Goals

Are you saving for a kitchen remodel? Maybe you’re looking at a trip to Hawaii. Whatever your goals, know what it will take to reach them. Don’t forget about the biggest savings goal of your life. Retirement takes planning. Use a retirement calculator to figure out your target amount.

4. Determine Timelines for Saving

You want to start cooking in that new kitchen by July. You’d love to take that trip to Hawaii in December. Divide the amount you want to save for each goal by the number of months until your deadline. For more complex calculations like retirement, refer to an online savings calculator.

5. Be Flexible

Add up your monthly goals. If the total exceeds your budget, start scaling back. You can do this by extending the timeline or cutting some goals altogether. Remember that many experts recommend having enough cash on hand to cover six months’ worth of expenses in case of emergencies. Once you reach a monthly sum that you can handle, set up an automatic monthly withdrawal for that amount from your checking account to your savings account.

For longer term goals, like retirement and college, look into tax-advantaged accounts like 401 (k) plans, IRAs or a Coverdell Education Savings plan. Consider getting help from an expert to help you with your overall financial plan.

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