2024 financial resolutions for long-term financial planning

Starting a new year brings with it a natural opportunity to revisit and refresh the priorities in your life. It's the perfect time to set meaningful new goals, whether that's adjusting your career path, spending more time with your family or volunteering more in your community.

Your finances are another area that can benefit from a yearly tune-up and adopting some new, positive money habits. It may seem like a lot of ground to cover, but even a few modest adjustments can put you on the right track for the year.

We'll cover six financial resolutions to consider to improve your money management skills in 2024:

1. Set financial goals & plan for them
2. Be intentional with saving & spending
3. Manage debt strategically
4. Prioritize saving for retirement
5. Protect the people you love
6. Plan to be tax-efficient

Making changes starts with focusing on what's most important to you. Then establish how to get there. Ask yourself some questions to identify what you want to work on: What milestones will matter to you in 10 or 20 years?

Every dollar you allocate toward one purpose—whether it's utility bills or retirement savings—is a dollar that's not available for something else. Inevitably, you have to prioritize what matters most when choosing what to do with your money.

In Thrivent's Financial Crossroads Survey, participants often reported making financial decisions at the expense of their personal values. But that doesn't need to be the case. In fact, your core beliefs should help guide your goal-setting so that you're focusing on what's truly important to you.

Now that you're starting a new year, do some reflection on what values you hold dear. It could be family, financial security, work-life balance or service to the community. Be sure to create goals that reflect your core ideals.

SMART stands for specific, measurable, achievable, relevant and timely. Creating SMART goals can help you turn a financial resolution into a detailed statement that includes not just what you want to do but also how you'll do it.

For example, you may know you want to buy a house. Recognizing that goal is a good start, but it doesn't give you a structure to accomplish it. Using the SMART framework, "buying a house" can be fleshed out as a commitment to opening a high-yield savings account and adjusting your current budget so you can add at least $500 to it every month via automatic transfers until you have enough for a down payment.

Once you have your SMART goals, share them with others to keep you accountable. Discuss your financial resolutions with your family so they can encourage you along the way and share their own goals with you.

The start of a new year is a convenient time to assess how you allocate your money and whether you have a realistic balance with your saving and spending. A sound plan for reaching your goals will address your needs both for today and years down the road.

Setting aside money for future use may seem challenging if you have a tight budget. But saving even a small portion of your paycheck for long-term financial goals can give you a feeling of assurance that you're progressing steadily toward your goals.

Rather than merely saving any money you have left over after your monthly spending, consider the "pay yourself first" method. This involves putting a portion of your paycheck directly into a savings account or retirement plan before you have the opportunity to spend it. For example, you might have a specific dollar amount transferred to a savings account each payday that you plan to use for a down payment for a house in the near future.

For your savings goals to be sustainable over time, you may need to adjust your existing spending. That means creating a budget or fine-tuning your existing budget.

Review your monthly costs, dividing your expenses into essential spending, such as housing and groceries, and discretionary spending, such as entertainment and dining out. As you assess where your money is going every month, you can identify potential ways to save—whether that's by canceling unused subscriptions or buying fewer new clothes. Prioritize your spending. If you had less income and had to decide what to cut, what would you do? That question can help clarify what really matters to you.

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Regularly carrying “bad” debt can contribute to stress and affect your well-being. If you're saddled with loans and credit card bills, chipping away at your debt load is one of the most important long-term financial planning goals you can make.

You can pay down debt in many ways, but a popular method is the debt avalanche. Identify all your credit accounts that have a balance, then organize them by their interest rates. The idea is to pay down or even get rid of the ones that are charging you the highest rates so you can get ahead of piled-on interest. You'll pay the minimum amount due on your accounts plus extra on the debt with the highest rate. Once that's paid down, you can focus on the account with the second-highest interest rate, and so on.

Experts suggest having an account set aside for emergencies that could cover three to six months of your essential living expenses if needed. Having a sufficient reserve of cash can decrease the chances you'll need to take on debt if, for example, you suddenly lose your job or face an unexpected medical bill.

The power of compound interest means even small increases in your retirement savings can potentially lead to a dramatic accumulation down the road.

Renewing your focus on your retirement strategy with that in mind is one of the best gifts you can give your future self.

As you set financial goals for the new year, you may want to review and adjust the amount you're putting into your nest egg. If you have a 401(k)-style retirement plan at work, it's a solid primary step in building your retirement assets—especially if your employer offers matching funds. If you're not putting in enough to maximize that match, you're leaving free money on the table.

• For 2024, you can contribute up to $23,000 ($30,500 if you're 50 or older) to your 401(k), 403(b) or 457(b).
• Another option you can pursue for retirement saving is a traditional or Roth IRA. For 2024, you can put up to $7,000 into these accounts if you're younger than 50 and up to $8,000 if you're 50 or older.

A common guideline is to set aside 15% of your paycheck, although your target contribution level should reflect your retirement date and when you started saving. If 15% isn’t realistic at this point, that’s OK. Just save as much as you’re able.

Changes in asset values throughout the year can cause you to end up with a portfolio that no longer reflects your investment objectives and risk tolerance. For example, a stellar year for the stock market might create an asset mix that's more stock-heavy than you desire and vice versa. Review your retirement accounts at the start of the year to make sure you're not taking on undue risk. If necessary, adjust your allocation to get back into the proper balance.

Safeguarding your family against life's "what ifs" is one of the most loving acts you can do for them. That includes having the right amount of life insurance to help them pay the bills and manage large expenses if something happens to you. Even if you already have a contract in place, review your coverage to make sure it still meets your needs. Looking over the past year and ahead to the new one, you may realize changes in your lifestyle or household mean you want a larger death benefit or a different type of life insurance.

Also, review your disability insurance at least once a year to make sure you have income if you experience a major injury or illness. Even if you receive coverage as part of your workplace benefits, be sure it's enough to support you and your loved ones if the unexpected happens.

The kinds of investments and accounts you have and how you use them have tax implications both year to year and across your lifetime. As the new year gets underway, make sure you have a tax-efficient financial strategy. To do that, you'll need to be aware of which tax buckets your assets are going toward: tax now, tax later or tax never.

The IRS typically makes inflation adjustments each year, both when setting up tax brackets and deciding how much you can contribute to tax-advantaged accounts, such as for retirement and health savings. Factoring these updated limits into your financial strategy may allow you to generate additional tax savings in the new year.

Also, review any financial laws that will take effect or sunset in the next year or two to decide if these changes could impact your financial strategy. For example, several important provisions in the Tax Cuts & Jobs Act are set to expire at the end of 2025. It's not too early to discuss possible tax rate hikes with your financial advisor to determine whether contributing to a Roth IRA—or converting traditional IRA assets to a Roth account—makes sense.

Workplace retirement plan contributions lower your taxable income. And if you contribute to a traditional IRA, you may be able to deduct your contributions for tax purposes.¹ If you're not taking full advantage of these tax-advantaged accounts, you could end up handing over more of your earnings to the IRS in the long run.

A quick start-of-the-year checkup can ensure you're investing efficiently. If you have investments outside of a retirement plan, you may want to consider tax-efficient mutual funds and other assets that reduce your taxable gains.

In addition to making necessary adjustments to your financial strategy now, commit to developing healthier habits throughout the year. For example, you may want to:

• Seek out ongoing financial education to make informed decisions
• Enhance your financial literacy by attending workshops or reading money management books
• Regularly track and assess progress toward financial goals, adjusting your strategy as needed

Creating financial goals can help you identify what you truly value in life and feel more confident about your finances. But you don't have to go it alone. A Thrivent financial advisor can help you review your financial situation and make sure you're starting on solid financial footing with your strategy in the new year.