Kickstart Your New Year with Effective Savings Habits: A Guide to Financial Resolutions

WILL K. | January 16, 2024

As we welcome the New Year, many of us set resolutions to improve our lives. However, the reality is that an alarming 80% of these resolutions fall by the wayside come mid-February, according to U.S. News and World Report. 

A concerning statistic accompanies this: over one in five Americans lack emergency savings, a sharp increase from 2022. With 22% admitting they have no financial safety net, it's clear that building effective savings habits is more crucial than ever for achieving financial stability and long-term goals.

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New Year Financial Resolutions: The Need for Change

As we set off on the path to achieve financial well-being, recognizing and addressing common pitfalls is the first step toward success. Consider the following challenges that often hinder financial stability:

  • Excessive and Frivolous Spending: Unchecked spending on non-essentials can quickly drain your finances. And, with so many folks shopping online (268 million online shoppers, to be clear), spending without ever looking back is easier than ever.
  • Never-Ending Payments: Long-term commitments, like continuous subscription services, can lead to a cycle of perpetual payments.
  • Living on Borrowed Money: Relying on loans or credit cards to meet daily needs can result in a debt spiral. In fact, 48% of us rely on our credit cards to cover basic living expenses.
  • Buying a New Car: While tempting, frequent car upgrades can strain your budget and hinder your ability to save.
  • Spending Too Much on Your House: A home beyond your means can become a financial burden.
  • Using Home Equity Like a Piggy Bank: Tapping into home equity for non-essential expenses may jeopardize your financial stability.
  • Living Paycheck to Paycheck: An astounding number of Americans—61%—are living paycheck to paycheck, up from 58% in March 2023. A lack of savings leaves you vulnerable to unexpected expenses, creating a perpetual cycle of financial stress.

One of the most significant consequences of poor financial behavior is debt accumulation. It's easy to fall into the trap of using credit cards or taking out loans without considering the long-term impact on your finances. This accumulation not only hampers your ability to save but also increases financial stress. 

As we start a new year, it's essential to break free from these patterns and establish effective savings habits that pave the way toward a more secure financial future. It's time to bid farewell to the old habits that hindered financial growth and embrace a fresh start for a brighter financial outlook in the coming year.

Setting Clear Financial Goals 

In pursuing financial success, setting clear and achievable goals is where it all starts. Many stumble not because their aspirations are too ambitious but due to their objectives' lack of specificity and attainability. Enter SMART goals — a framework that stands for Specific, Measurable, Achievable, Relevant, and Time-bound.

The SMART approach:

  • Specific: Goals should be precise and unambiguous, leaving no room for interpretation.
  • Measurable: Establish criteria to track progress and determine when the goal is achieved.
  • Achievable: Goals should be challenging but within the realm of possibility.
  • Relevant: Ensure goals align with your overall financial objectives.
  • Time-bound: Set a deadline to create a sense of urgency.

Many fail in achieving their goals due to vague aspirations or overly ambitious targets. Consider the example of a generic goal like "become a millionaire." This goal lacks specificity and a timeframe, making it difficult to measure progress or create a realistic plan.

Restructuring this as a SMART goal, such as "Save $10,000 by December through a combination of increased savings and a side hustle," makes it more achievable. It provides a specific amount, a clear timeframe, and a practical approach.

Encouraging readers to define their financial objectives for the year is crucial. Whether it's paying off credit cards, boosting retirement savings, cutting back on streaming services, starting a side hustle, or enhancing financial literacy, each goal should be tailored using the SMART criteria. 

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Creating a Budget 

Creating a family budget is the best way to cultivate good savings habits and provide a roadmap to manage finances responsibly. At Cash Store, we advocate the 50/20/30 budgeting methodology as a practical approach to allocating income wisely. This model divides your salary into three categories:

  • 50% for Needs: Essentials like housing, utilities, groceries, and transportation fall into this category.
  • 20% for Savings: Allocate a fifth of your income to savings, building a financial cushion for future goals.
  • 30% for Wants: Non-essential spending, such as entertainment or dining out, fits into this category.

For example, with a $75,000 annual salary:

  • $37,500 (50%) for Needs
  • $15,000 (20%) for Savings
  • $22,500 (30%) for Wants

Practical tips for creating and sticking to a budget include:

Sleep on big purchases: Consider carefully before making significant purchases.

  • Never spend more than you have: Avoid accumulating debt by living within your means.
  • Stick to a lower credit card limit: Set a cap that aligns with your budget to curb unnecessary spending.
  • Budget to zero: Allocate every dollar to a specific category to maximize financial control.
  • Try a no-spend challenge: Periodically challenge yourself to limit non-essential spending. Or, try the save $5 a day challenge to see where it takes you.
  • Stop paying for fees: Eliminate unnecessary expenses by being mindful of fees and charges.
  • Plan your meals: Outline weekly meals to control grocery costs and minimize spontaneous spending.
  • Do your grocery shopping online: Take advantage of online tools to plan and stick to your grocery budget effectively. Try coupon apps and grocery apps for extra savings.

By adopting these practical measures and the 50/20/30 budgeting methodology, individuals can create a sustainable budget that meets their needs and fosters a disciplined approach to saving.

Exploring Different Saving Methods

Developing effective savings habits involves employing diverse savings methods tailored to individual financial situations. Here are some key strategies to consider:

1. Automatic Transfers

  • Benefits: Set up automated transfers from your checking to savings account, ensuring consistent savings without effort.
  • Drawbacks: Lack of flexibility, and adjusting in case of unexpected expenses might be challenging.

2. Emergency Funds

  • Benefits: A dedicated fund for unexpected expenses, offering financial security.
  • Drawbacks: Building emergency funds can take time, and the temptation to dip into them for non-emergencies may arise.

3. Micro-Savings Apps

  • Benefits: Apps that automatically save small amounts from your transactions, promoting effortless saving.
  • Drawbacks: Fees associated with some apps, and reliance on technology may pose a risk.

Utilizing these savings methods contributes to achieving the 50/20/30 balance, aligning with the Cash Store philosophy. Automatic transfers facilitate the 20% savings goal, emergency funds cover unexpected needs within the 50% needs category, and micro-savings apps complement the 30% for wants.

To choose the method that suits your financial situation, consider your goals, risk tolerance, and personal preferences. Experimenting with a combination of these savings methods can be effective, providing a well-rounded approach to building sustainable savings habits. Remember, the key is finding a method that aligns with your lifestyle and encourages consistent contributions toward your financial well-being.

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Breaking Bad Financial Habits

Overcoming common barriers to saving money requires a conscious effort to address habits like impulse buying, overspending, living beyond means, and overusing credit cards. Here are actionable tips to reshape your mindset toward money:

  • Forgive Your Past Financial Mistakes: Acknowledge that nobody is perfect, and past mistakes shouldn't define your financial future.
  • Wrap Your Brain Around Your Spending Habits: Reflect on your relationship with money, identify triggers, and work towards a healthier mindset.
  • Stop Comparing Yourself to Others: Focus on your financial journey and goals, rather than comparing yourself to others.
  • Focus on Creating Good Habits: Establish routines that promote responsible spending, saving, and overall financial wellness.
  • Create a Budget and Stick to It: Design a budget that aligns with your lifestyle and goals, making financial management a positive and fulfilling experience.
  • Be Thankful for What You Have: Gratitude can shift your perspective, helping you appreciate what you have and discouraging unnecessary spending.

By addressing these elements, individuals can break free from detrimental financial habits and pave the way for a more secure financial future. Developing a financial mindset involves understanding oneself, embracing positive habits, and staying focused on personal goals rather than external comparisons.

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Investing in Your Future

While saving is crucial, investing is the key to unlocking long-term financial security. In a world where inflation erodes the value of money over time, strategic investments can help your wealth grow and beat the rising cost of living. 

Let's explore some basic investment options that can pave the way for a financially robust future:

401(k) or Other Retirement Plans

  • Benefits: Employer-sponsored retirement plans like a 401(k) offer tax advantages, and some employers may match your contributions.
  • Considerations: Contributions may be subject to withdrawal penalties before retirement age.

Certificates of Deposit (CDs)

  • Benefits: CDs provide a fixed interest rate for a specific term, offering a predictable return.
  • Considerations: Funds are tied up for the agreed term, limiting liquidity.

High-Yield Savings Accounts

  • Benefits: These accounts offer higher interest rates than traditional savings accounts, promoting faster growth.
  • Considerations: Some accounts may have minimum balance requirements or other restrictions.

Investing doesn't have to be complex, and exploring these opportunities can kickstart your journey toward financial growth. Diversifying your investments across different asset classes and understanding your risk tolerance is crucial. 

While retirement plans secure your future, CDs provide stability, and high-yield savings accounts offer liquidity with better returns. Remember, the key is to start early, stay informed, and consider consulting a financial advisor to tailor an investment strategy that aligns with your goals and risk tolerance. Investing in your future today ensures a more prosperous and secure tomorrow.

Tracking Progress and Staying Motivated

Achieving your New Year financial resolutions requires not only setting goals but also actively tracking progress. Several tools and apps can help you stay on top of your savings journey, ensuring you remain focused and motivated throughout the year. 

Here are some personal finance apps to consider:

  • Mint: Mint is a comprehensive budgeting app that helps you keep track of your spending, sets financial goals, and provides a clear overview of your financial health.
  • YNAB (You Need A Budget): The YNAB app follows a unique budgeting approach, helping you allocate every dollar to a specific category and control your finances.
  • Spendee: Spendee is an intuitive app that lets you track your expenses, set budgets, and visualize your financial habits through insightful charts.
  • Empower: Combining budgeting and savings features, Empower analyzes your spending patterns and suggests ways to save more money.
  • CashPhlow: A user-friendly app that allows you to monitor your cash flow, CashPhlow helps you track expenses and set achievable savings goals.

To stay motivated on your savings journey:

  • Celebrate Milestones: Acknowledge and celebrate small victories along the way, reinforcing positive financial behavior.
  • Visualize Goals: Create a visual representation of your financial goals, whether it's a dream vacation or a debt-free life, to keep you motivated.
  • Connect with a Community: Join online forums or groups with individuals pursuing similar financial goals for mutual support and encouragement.
  • Regularly Review Progress: Schedule regular check-ins to assess your progress, adjust goals if needed, and celebrate continuous improvement.

Remember, tracking progress in savings is not just about numbers; it's about the positive impact on your financial well-being. Embrace the journey, stay committed, and watch your financial goals become a reality.

This Year, Set Yourself on a Path to Effective Savings Habits

As we embrace the New Year, pursuing financial well-being becomes promising. Reflecting on the significance of developing new savings habits is not merely a resolution but a commitment to a more financially secure future. The journey begins by recognizing common pitfalls like excessive spending, never-ending payments, and living paycheck to paycheck, and addressing these with practical solutions.

Setting clear financial goals, especially through the SMART approach, ensures a focused and achievable path. The 50/20/30 budgeting methodology acts as a compass, guiding the allocation of income toward needs, savings, and wants. Breaking bad financial habits requires a proactive mindset, forgiveness for past mistakes, and a keen understanding of the emotions surrounding money.

Exploring different savings methods, from automatic transfers to micro-savings apps, allows for a diversified and effective approach. Investing in the future through retirement plans, CDs, or high-yield savings accounts is the key to long-term financial security.

Tracking progress and staying motivated through innovative apps and motivational strategies are essential to the journey. Celebrate milestones, visualize goals, connect with a community, and regularly review progress to maintain momentum.

As you embark on this financial transformation, consider taking actionable steps today. Explore the resources on the Cash Store blog for insightful tips, or if you find yourself in a financial pinch, check out our installment loans and cash advance loans. Remember, small changes today lead to a wealthier tomorrow. Seize the opportunity, commit to your financial goals, and pave the way for a future of financial literacy and great decisions.

The content on this page provides general consumer information or tips. It is not financial advice or guidance. Each person’s circumstances are unique. The Cash Store may update this information periodically. This information may also include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs. 

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