The start of the new year is the perfect time to make a resolution to improve your finances, no matter your age. If you’re a 20- or 30-something millennial, your financial well-being should be one of your highest priorities. Whether you’re graduating from college or are in the early stages of your career, the decisions you make today can determine what kind of shape you and your money will be in for decades to come.
Be careful what kinds of New Year’s resolutions you try to commit to in 2016, though. Some resolutions might sound good in theory, but if you’ve failed to think them through, you might end up making your financial situation worse. Here are seven New Year’s resolutions you shouldn’t make in 2016 if you’re a millennial.
1. Save “more” money.
There’s nothing wrong with saving more money, but you need to define what “more” is to you. If you don’t know what it is you’re saving for and how much you want to save, you won’t have a good chance of following through with this vague resolution.
Start the new year by setting some systematic savings goals, both short term and long term. Pick something specific and research a base amount to set for your savings each month. For example, if you need to save for a car, determine how much you will need for a down payment and your monthly payments after that. If you want to increase your 401(k) contribution, calculate how much more you can afford to subtract from your paycheck and still be able to cover your monthly expenses. Once you’ve set clear goals, find specific ways to save that also allow you to take advantage of compound interest to maximize your savings potential.
2. Pay down debt.
Paying down debt is good idea but not when it negatively impacts your ability to pursue higher-priority savings goals. Saving money in an interest-earning account, and specifically contributing to an independent retirement account while you’re young, can have long-term benefits for your financial health.
Some personal finance experts advise against aggressively tackling debt — especially student loan debt — because the interest rate on the loan is less than what you can earn with the right investments in place. Once you set your savings goals, then you can figure out the best way to pay off your student loan or credit card debt as quickly as possible.
Aiming to increase your payments by an extra $50 to $100 per month is a realistic resolution. Pay off your balances monthly, and you’ll gradually improve your credit score, too.
3. Use credit cards less.
If you’ve recently gotten out of debt or are worried about getting further into debt, making a New Year’s resolution to minimize your credit card use sounds like a good idea. But don’t make it a “breaking up with credit” resolution.
Using a debit card exclusively can potentially make you vulnerable to security risks, and it doesn’t keep your credit current and revolving, so it can hurt your FICO score. Don’t just cut up credit cards you rarely use without understanding how closing accounts can impact your credit score. Instead, use your credit cards for smaller purchases in tandem with your debit card, and keep lower balances that you can easily pay off on time every month.
4. Join a gym.
Exercising more and eating healthier food are great goals to have whether you’re a millennial or a baby boomer. Too often, however, people think these resolutions require overspending on expensive gym memberships or daily trips to Whole Foods. If you add in personal trainers or workout classes that cost extra, becoming healthier can be toxic to your budget.
Instead, look for free or low-cost alternatives to get in shape. Invest in a good pair of running shoes, and hit the local trails or some weights. Check out a nearby YMCA or community center to see if they offer spin or yoga classes for less than large chain gyms. If you must join a big gym, look for deals on Groupon and other coupon sites so you don’t pay full price.
As for that new diet, visit a local farmers market and watch for sales or rewards card discounts at your supermarket. Look up easy, healthy diet changes and recommended grocery shopping lists and recipes online for free.
5. Go to graduate school.
Depending on your industry, a master’s or doctoral degree can open up many new doors for you along your career path. It also can be a fast-track to debt.
Before attending your first class, you’ll have to pay to take the GRE and submit applications to your choice universities. The GRE general test costs approximately $195, according to the Educational Testing Service, and test preparation courses can run more than $1,000. If you want private tutoring, you’ll need almost triple that amount. Next, you’ll have to apply for student loans.
What many prospective graduate students don’t consider is whether the cost of getting another degree will guarantee an increase in pay. Research the long-term degree and experience requirements needed to advance in your career. A better plan might be to stick with your bachelor’s degree and resolve to learn new skills for your current job.
6. Buy a new house or car.
If you just graduated or are finally earning what feels like a good income, you might be tempted to go shopping for a new car or your first house, especially if your friends and peers are posting on social media about theirs. Don’t feel pressured to keep up with the Joneses. What you don’t see are any posts about how much debt they took on to make those purchases.
A better resolution to have while you’re in your 20s and early 30s is to keep building a good credit history, which you’ll need it to get approved for a mortgage or auto loan. That doesn’t mean you shouldn’t drop the car or house idea entirely, however.
Research what down payments cost, and start saving now in an account that earns compound interest so that you can afford a great car or house in a few more years.
7. Change jobs.
After a few glasses of Champagne while celebrating New Year’s, you might start thinking you want to just quit your miserable job and pursue a new dream. Don’t make any hasty decisions.
If you really want to quit your job in 2016, you need to first line up a new stream of income so that you can pay your rent and monthly bills. Decide what new job or role would make you happier, and then outline the steps you’ll have to take to make that happen in the coming year. Build your professional network and leverage your social media contacts, attend networking events and conferences, and take classes or seminars to build new skill sets.
These efforts can help you feel like you’re moving in a more positive direction for your career. You might also find that you can improve your standing in your current job in the process. Be smart about how to pursue a better — and better-paying — job in 2016, so that you don’t spend the year trying to conquer unemployment instead.
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7 Financial New Year’s Resolutions Millennials Should Avoid originally appeared on usnews.com
