The new year often sparks renewed motivation to accomplish our biggest money goals. While covering regular expenses like housing, food, and bills is essential, there are a few other financial priorities Americans should zero in on to build long-term stability.
Getting these personal finance fundamentals dialed sets you up for greater financial freedom down the road. Here are four top areas to prioritize besides just paying the bills in 2024.
4 Financial Priorities to Adopt This Year
1. Build a Robust Emergency Fund
Life often throws unexpected punches – job losses, health issues, major home repairs. Having an established emergency fund mitigates the stress these surprises cause. Most experts recommend having 3-6 months’ worth of living expenses set aside in a dedicated high yield savings account to tap when emergencies hit.
With the average monthly expenditure for households being around $5,100, you should aim to have $15,300 to $30,600 set aside in safe emergency savings based on your household size and monthly spend.
Building up your emergency reserves requires discipline and consistency. Automate a piece of each paycheck to go straight into your designated e-fund account before that money reaches your everyday spending account. Start with directing $25-50 from each pay period towards this savings, then increase the fixed monthly contribution over time as your pay rises.
Even setting aside $100 a month would generate $1,200+ in emergency savings after one year. Consistency here is key – make automatic saving an ingrained habit on payday and your rainy day reserves will grow steadily.
2. Pay Down Toxic Debt
Carrying excessive, high-interest debt like credit cards, payday loans, and personal lines of credit limits financial flexibility since so much income goes towards interest versus actual pay down of principal balances.
Make eliminating toxic debt an urgent priority for 2024. List out all debts owed by balance size, interest rate and minimum payment. Then employ strategies like the debt avalanche (paying highest interest debt first) or the debt snowball (paying smallest balance first) to begin tackling these systematically.
Set an aggressive monthly payment target for each debt that allows paying 2-3x the minimum payment due. Paying an extra $100 a month on a credit card bill with a $2,000 balance can lead to paying the card off 18 months faster and $700 less in interest.Copy code
| Debt Type | Balance | Interest Rate | Min. Payment | Aggressive Payment |
|---|---|---|---|---|
| Credit Card 1 | $3,000 | 14% | $25 | $100 |
| Credit Card 2 | $8,000 | 20% | $40 | $250 |
| Car Loan | $12,000 | 4% | $350 | $500 |
| Student Loans | $22,000 | 6% | $300 | $400 |
Attack debts with intensity – channel raises, tax refunds, side hustle income directly towards balances. Weight off your shoulders builds exponentially each debt eliminated!
3. Amplify Retirement Investments
Retirement likely feels ages away, especially in your 20s and 30s. But thanks to compound growth, investing consistently from early on in your career sets you up significantly better decades later.
Use 2024 to build momentum boosting contributions to tax-advantaged retirement accounts like 401(k)s, IRAs, HSAs or self-directed vehicles. Increasing automated investment deposits even by 1-2% annually makes major difference over 30+ year time horizon.
Here’s a guide based on age:
- 20s: Contribute enough to get full employer 401(k) match, then aim for 10-15% of your gross income going towards retirement investments in stock-focused funds each year.
- 30s: Look to save 15-20% of income towards retirement in this decade. Max out IRA limits in addition to 401(k) deposits.
- 40s+: Save 20%+ of your income for retirement through automated investing. Shift portfolio to more fixed income assets as retirement approaches.
Consult a fiduciary financial planner if needing help choosing appropriate accounts, investments, and strategies personalized for your situation. Retirement saving is a long game – start early and stay consistent!
4. Make Investing Non-Negotiable
Building long run wealth relies heavily on harnessing market returns through invested assets like stocks, bonds, real estate. Make contributing to brokerage accounts, IRAs, HSAs, 529s, and other investing vehicles a non-negotiable piece of your budget.
Beyond pure retirement accounts, aim for 10-15% of take home pay to go towards building an invested portfolio diversified across various asset classes appropriate for your age and risk appetite. Over decades, compound growth works wonders!
Platforms like Vanguard, Schwab, Wealthfront make establishing DIY investment accounts accessible for any budget. Or seek guidance from fee-only financial advisors if needing help crafting personalized portfolio allocation strategies.
Take advantage of market upside rather than leaving excess cash stagnant in traditional low interest savings – investing early and often accelerates your ability to accomplish money goals!
Optimizing Your Budget & Finances Long Term
Achieving essential financial priorities while still covering monthly bills is achievable through an intentional budgeting approach and smart automated money management. Follow these personal finance best practices:
Track spending trends: Gain visibility into exactly where every dollar goes each month – use budget apps like Personal Capital or YNAB to monitor broad categories like housing, debt, transportation & utilities, food, discretionary. This illuminates waste and excess to cut back on.
Balance tradeoffs: With finite monthly income, decide what is most important to reasonably fund versus excess wants. Cover essential needs like rent & healthcare, then allocate leftover towards key financial priorities per above – emergency savings, debt payoff, retirement & investing.
Build up income streams: Beyond cutting expenses, finding ways to increase your income accelerates saving ability dramatically. Seek promotions and raises at work, find a side hustle that pays handsomely, build investment portfolios that generate solid returns. More cash flow funds goals faster.
Automate diligently: Manual saving and payment takes major discipline. Automate transfers on payday to remove temptation and friction – direct money straight into emergency fund, debt payments, retirement accounts before you can touch it. This builds wealth faster.
Reassess quarterly: As life evolves, reevaluate financial priorities and spending categories each quarter to course correct savings levels and budget categories accordingly. Financial plans flex as circumstances shift.
The new year delivers a perfect moment to double down on essential money goals – emergency savings, debt reduction, retirement contributions, investing. Diagnose what your dollars need from you in 2024. Then make it happen! Consistency here pays off for decades ahead.
For more content check out A Comprehensive Compass for 2024: Crafting Your Customized Financial Course.
Note: This blog post is written by a professional trader and investor based on personal experiences and opinions. It is not intended as financial advice. Always conduct your own research and consult a financial advisor before making any financial decisions.
