10 min read
Smart Savings Resolutions: Top 5 Smart Money Habits for the New Year
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According to the Survey of Household Economics and Decision making (SHED), 37% of Americans would not cover a $400 emergency bill without borrowing or selling something (Federal Reserve, 2024). This startling statistic highlights the importance of cultivating smart money habits. As the calendar turns to 2025, it's the perfect opportunity to reflect on our financial habits and well-being.
LESSON CONTENTS
Why building smart money habits is essential
Financial success doesn't happen overnight; it results from consistent, disciplined actions over time. When you develop smart money habits, you lay the groundwork for a secure financial future. Here are some reasons why good financial habits are indispensable:
- Achieving financial goals: Good money habits help turn aspirations into reality, whether medium-term ones like saving for a down payment on a house or long-term ones like securing your retirement.
- Reducing stress: Money-related stress takes a toll on your health and relationships. The latest Stress in America report revealed that 64% of Americans cited money as the leading source of stress (American Psychological Association, 2024). You can alleviate anxiety and achieve peace of mind by cultivating better money habits.
- Building wealth over time: Consistent saving and investing allow you to use compound interest. A famous quote says, "Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it."
Starting this journey might seem daunting, but you don't have to do it alone. Ent Credit Union offers personalized financial coaching and money management tools to support you every step of the way.
Assessing your current money habits
To fix a problem, you must first identify and acknowledge it. Thus, it's essential to understand your current money habits. Evaluating your spending and saving patterns will identify areas where you can make meaningful changes.
Track your spending
Use a notebook, spreadsheet tool, or budgeting app to note every monthly purchase, no matter how small. This exercise will reveal patterns in your spending behavior.
Identify financial leaks
Monitoring your spending will identify leaks. Small, unplanned purchases can quickly add up. Setting a budget for discretionary spending and avoiding impulse buys can help control spending.
Categorize your expenses
Group your expenses into categories like food, transportation, utilities, housing, entertainment, and miscellaneous. Are you spending more on discretionary items than you realized?
Subscriptions
Many people subscribe to various services like streaming platforms, gym memberships, or other monthly services. While some may be essential, others might be forgotten or underutilized. Reviewing and canceling unnecessary subscriptions can save significant amounts of money each year.
Analyze your income
List all your earnings, including your salary, freelance work, bonuses, or passive income. Knowing your total income helps in creating a realistic New Year budget.
Evaluate your debt and savings
Assess and tabulate your debts, including student loans, credit cards, and mortgages. Note their interest rates and monthly payments. Also, calculate your net worth by subtracting your total liabilities from your total assets for a snapshot of your financial health.
Ent’s comprehensive online and mobile banking tools are useful when assessing your habits. For instance, you can set custom alerts on transactions and view eStatements. Ent’s Money Insight also lets you view all your accounts in one place, calculate your net worth, and automatically track your spending.
Top 5 smart money habits to adopt in 2025
Embracing the following smart money habits can significantly impact your financial well-being in 2025:
Automate your savings
Automating your savings ensures that you consistently put money aside without having to think about it. Set up automatic transfers from your checking to investment or savings account each month.
Budget and practice mindful spending
A budgeting plan guides your spending and saving decisions. Utilize the 50-30-20 rule as a foundation: allocate half of your earnings to needs, 30% to wants, and the balance to savings and debt repayment.
Secondly, be intentional and plan your expenditures. Before buying anything, weigh whether it aligns with your financial goals. Also, is it a need or a want? Mindful spending reduces impulse buying and keeps your budget on track.
Pay off high-interest debt
High-interest loans, such as credit card balances, can hinder your financial progress. Fed data shows that the average credit card interest rate as of August 2024 was 21% (St. Louis Fed, 2024). Under these high rates, your debts can quickly spiral out of control. Therefore, strategies like the debt avalanche or the debt snowball to pay off debts should be used.
Invest in your future
Contribute to retirement accounts like an IRA or 401(k). The earlier you start, the more time your money has to grow.
Invest in your financial education
Knowledge is power when it comes to managing money. Educate yourself on budgeting, investing, and retirement planning at the Ent Education Center. Our educator resources, podcasts, and articles will enhance your understanding of the best money habits and help you make informed decisions.
Staying consistent with your new money habits
Adopting new habits is one thing; maintaining them is another. Here are strategies to help you stay consistent with your smart money habits:
Set reminders and alerts: Use apps or calendar reminders to keep track of bill payments, savings contributions, and budget reviews. Ent's mobile app offers customizable alerts to help you stay on top of your finances.
Establish small milestones: Break down larger financial goals into smaller, achievable steps. Celebrating these milestones can boost your motivation. For example, if your goal is to save $5,000, celebrate every $1,000 saved.
Create a support system: Share your financial goals with trusted friends or family members. They can hold you accountable and encourage you.
Review your progress regularly: Schedule monthly or quarterly check-ins to assess your financial situation. This practice helps you stay focused and make necessary adjustments.
Automate where possible: Beyond savings, automate bill payments to avoid fees and keep a good credit score. Register for Ent’s digital banking and automate your finances.
Review and adjust your money habits regularly
Life is full of changes, and your financial plan should adapt accordingly. Regularly review and adjust your money habits to align with your current circumstances and goals. For instance, if you receive a raise, bonus or change jobs, adjust your budget and savings plan to reflect your new income level.
Secondly, periodically review your expenses to identify new areas where you can cut costs. For instance, you might find a better insurance deal or cancel subscriptions you no longer use.
Reviewing your habits helps you update your financial goals. As you reach certain milestones, you set new goals to keep progressing. Lastly, reviews inform you about financial trends like economic indicators, interest rates, and market trends. This knowledge is valuable in making timely decisions about investments and savings.
Ent can be a valuable partner in your financial journey. We have money management tools and financial coaches who can work with you on debt repayment and how to budget and save. Plus, our financial planning experts help you navigate complex investing decisions so that you earn more on your money. Join Ent today for the best tools and expert advice to help you develop smart money habits.
FAQs
What are some smart money habits to start in 2025?
Start by automating your savings, practicing mindful spending, paying off high-interest debt, building an emergency fund, and investing in your financial education. Most importantly, prioritize your future financial security by contributing to your retirement accounts.
How can I build better money habits that last?
Consistency is crucial. Set clear financial goals, adhere to a budget, monitor your progress, and recalibrate strategies as needed. Utilize tools like budgeting apps and custom alerts that make it easy to manage your money and maintain better money habits over time. Lastly, have a support system like a trusted friend to hold you accountable.
Why is it important to review my money habits regularly?
Reviews ensure your financial strategies align with your current goals and life circumstances. Also, these regular check-ins help you stay on track and adjust your money habits. For instance, if your income increases significantly, this might mean you need to pay off debt aggressively and allocate more to savings.
What are easy ways to save more money each month?
Easy ways include automating your savings, sticking to a zero-based budget reducing discretionary spending, negotiating bills, and using cash-back apps or coupons. Small changes like preparing meals at home instead of dining out can add up over time, boosting your savings significantly.
How can I make budgeting a consistent habit?
Use budgeting tools or apps to simplify the process. Ent offers user-friendly budgeting tools like Ent’s Money Insight that integrate with your accounts, making it easier to stick to your budget. Also, involve family members for accountability and to ensure everyone is on the same page. Lastly, schedule regular times to assess progress and update your budget.
Citations
American Psychological Association (2024, October 22). Stress in America October 2024 Report. https://www.apa.org/pubs/reports/stress-in-america/2024/2024-stress-in-america-full-report.pdf
Federal Reserve (2024, May 21). Report on the Economic Well-Being of U.S. Households in 2023 - May 2024. https://www.federalreserve.gov/publications/2024-economic-well-being-of-us-households-in-2023-executive-summary.htm
St. Louis Fed (2024, October 7). Commercial Bank Interest Rate on Credit Card Plans, All Accounts. https://fred.stlouisfed.org/series/TERMCBCCALLNS
*PLEASE NOTE: This article is intended to be used for informational purposes and should not be considered financial advice. Consult a financial advisor, accountant or other financial professional to learn more about what strategies are appropriate for your situation.
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