How to Crush Your Money Goals in the New Year

Most New Year's Resolutions are destined to fail, but that doesn't mean that yours will if you're serious about your financial goals in the upcoming new year. There are tried and true strategies for behavior change, which we will share in this post.

Specifically, we will share how you can save more money and reduce debt. These are the two most common financial goals to set for the new year.

Save More Money

Whether you can save more money in your marriage comes down to three factors.

First, do you earn enough to save? Varying reports find that up to 4 in 5 households live paycheck to paycheck. I doubt all of those households have to. Certainly, some have the space to cut bad spending habits, but that's not always the case. Some folks are just scraping by because that's the best they can do.

Second, success is determined by whether the couple can support one another. Established shared financial goals you are both passionate about achieving and giving yourselves grace when you hit the inevitable bump in the road.

Third, have you created an environment that is structured to make spending difficult and painful and saving easy and automatic?

Here are direct links to five complementary tips to save more money in your marriage:

Tip 1: Set your savings goals together

Tip 2: Save for emergencies first

Tip 3: Change your environment

Tip 4: Make it automatic

Tip 5: Give yourself some grace

Reduce Debt

Tackle the Debt You Hate Most

A great way for married couples to reduce debt is to focus on eliminating the debt they hate the most. Dealing with the debt you hate most prioritizes financial relief and the health of your relationship by addressing the emotional strain debt can cause.

We guide you through the specifics in our previous post, Reducing Debt in Marriage: Tackle the Debt You Hate the Most.

The Avalanche Method

When applying the avalanche debt repayment method, you first pay the highest interest rate loans. Once that loan is paid off, you put that money toward the account with the next highest interest rate until you are done. After that, you repeat the process.

Positive

If you can stick to it, this method is the fastest way to pay off your loans and will save you the most money.

Negative

The process can feel discouraging if the first loan isn't repaid quickly, which can happen if the highest-interest rate loan has a high balance.

Example

You want to pay down your debt faster than the minimum monthly payments.

Here is a list of your monthly debt payments:

A. Credit card balance of $400 at 18% APR

B. Payday loan balance of $500 at 350% APR

C. Mortgage balance of $246,000 at 5%

Here is the order you would pay these debts off:

1. Payday loan balance of $500 at 350% APR

2. Credit card balance of $400 at 18% APR

3. Mortgage balance of $246,000 at 5%

The Snowball Method

The snowball debt repayment method begins by paying off the smallest loan first. When that debt is paid, the money is rolled over to the next-smallest debt owed.

Positive

Paying off the loan with the smallest balance first is the fastest way to eliminate your first debt and can provide a psychological boost to keep you motivated.

Negative

This method is the slowest way to pay off your loans and will cost you the most.

Example

You want to pay down your debt faster than the minimum monthly payments.

Here is a list of your monthly debt payments:

A. Payday loan balance of $700 at 350% APR

B. Credit card balance of $600 at 18% APR

C. Mortgage balance of $246,000 at 5%

Here is the order you would pay these debts off:

1. Credit card balance of $600 at 18% APR

2. Payday loan balance of $700 at 350% APR

3. Mortgage balance of $246,000 at 5%

The Hybrid Method

First, pay off the loan with the smallest balance using the snowball method. Once you have gained the confidence to see the plan through, switch to the avalanche method.

The psychological boost of paying off a debt and the most mathematically effective approach to tackling your debts will give you the best of both worlds.

Support for Your Marriage

I support couples who want to better manage money or the home as a team in their relationship.

I'm the only Accredited Financial Counselor® and Fair Play Facilitator®, empowering high-achieving couples with systems to manage money and the home as a team — drawn from decades of national leadership and lived experience.

Click here to learn more about me and how I can help.

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