The turn of the calendar into a new year reminds us to do some reflection and goal setting for the future. There’s no better time to consider your financial plan and make new commitments to yourself and your goals. You already know we like to dispense advice about budgeting, saving, retirement, credit and lots more under the financial sun. This time, we’re hitting you with three, specific financial goals that you can take action on right now, no matter where you are on your financial journey.

1. Use the 50/30/20 budgeting method.

We’ve said it before, and we’ll probably say it again: everyone should have a budget. There are many different ways to budget, such as the envelope method and the zero balance budget (both explained here). For beginners especially, we recommend trying the 50/30/20 method, which is a great way to get yourself into the budgeting mindset.

With this budgeting strategy, you’ll plan for 50% of your income to be used on essentials, like rent or mortgage, groceries, utilities, insurance and transportation. These are the non-negotiable costs of living that need to be prioritized first in your budget. Next, you’ll allot 30% for wants, otherwise known as discretionary spending. Think hobbies, entertainment, dining out or other indulgences, like technology upgrades. Giving yourself a reasonable amount for the fun stuff lets you enjoy life without feeling stifled. Lastly, you’ll use 20% of your income to pay down debt and save for the future. Using this percentage breakdown, you will be able to work toward your financial goals, while developing good financial discipline. If you decide you’re comfortable reducing discretionary spending even lower than 30%, you can shift more money toward savings and debt repayment. That brings us to goal number two.

2. Up your saving by 5%.

Now, we’ve just advised above that you create a budget that puts at least 20% toward saving and paying off debt. The unique combination will be up to you, depending on your current debt level and savings goals, but don’t feel like you have to wait until you’re 100% debt-free to start saving. In fact, when it comes to saving, especially for retirement, time is your biggest asset. Once you’ve got an emergency fund that would cover 3-6 months of expenses available in a liquid savings account, you should focus on saving for longer-term financial goals, including retirement. If you haven’t opened an IRA or other retirement account, consider opening one this year. (Learn more about retirement account options.) Remember, everyone starts somewhere. If you can’t raise your saving by 5% yet, start by raising it just 1% and increase over time.

3. Use the avalanche method to tackle high-interest debt.

You may have heard of the snowball method for repaying debt, which involves paying off the smallest balances first (in addition to making the required minimum payments on all other debts, of course) to train yourself into a debt-repayment mindset, then “snowballing” toward paying the larger balances. That method can work for some people, particularly if seeing a zero-balance on a bill will encourage you and fuel your savings mentality.

We suggest a more aggressive method: the avalanche method. This involves paying off the balances with the highest interest rates first. That way, you’ll pay less in total over the life of your loans because you’ll cut down on compounding interest. Something else we suggest? Consolidate the higher-interest debt to a lower rate wherever possible, which may involve taking out a personal loan or utilizing balance transfers to move debt. (Learn more about balance transfers at Grow.)

We hope you’ll consider some or all of these goals as part of your financial strategy. Cheers to leveling up your finances in 2021!

We look forward to continuing to share advice and information to promote financial literacy for our members and community. Do you have a topic you’d like to see covered? Let us know by messaging us on Facebook or Instagram! We’d love to hear your input.

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