Best Financial Resolutions For The New Year

Do you make resolutions at the end of the year? Most of us make them, but don’t follow through to fruition. However, financial resolutions are different because they’re a way to plan for the new year and adjust to changes that may be coming.

For many, 2025 has been challenging, especially with still-high inflation in groceries, rent, and other items. Though inflation has come down from the June 2022 peak of over 9.1%, the Fed is not signalling many rate cuts in 2026. They feel their job is to reduce inflation to the 2% target, which is incomplete. The latest unemployment rate rose modestly to 4.6%, below the long-term average of 5.67%. In the coming year, economists will need to consider how AI will affect job displacement in the workforce and create new areas of growth.

Be Optimistic For The Future

The latest US GDP growth rate was a substantial 4.3% annual increase in the third quarter of 2025, according to the Bureau of Economic Analysis (BEA). That is the fastest growth our country has seen in the last two years. Many expect our economy to be pretty stable in 2026 with low unemployment and anticipated development. However, there may be some volatility if the current White House administration has to reverse tariffs in place due to an upcoming Supreme Court decision. Rather than lead into the year with Chicken Little sentiment now, let’s bring in 2026 with some old-fashioned optimism.

We want to share financial lessons with you as you plan for 2026. You may do this out of habit or need, or you may be already in good financial shape. Hopefully, you did well during the robust financial markets in stocks and cryptocurrencies. However, the markets may be more tame in the coming year and may require some rebalancing or broadening of your stock picks. It’s always a good idea to review, talk to your financial advisor, and make some changes, if needed. Make financial resolutions you can keep for the long term.

 

1. Review Your Financial Goals

If you realized your financial goals in 2025, you should feel wonderful about the accomplishment. Maybe you traveled, earned a promotion, sent your kids to college, or bought or sold your home, but what’s the plan for 2026? Revisit your goals for the coming year. Set reasonable financial goals for 2026 and beyond. 

We can learn from our experiences that may have highlighted past mistakes, such as not saving enough for unexpected emergencies. There isn’t a crystal ball to prepare for such events, but you should realize that things can happen to us.

2. Build An Emergency Fund

Having savings on hand for emergencies should be a top financial goal. Establish an ample emergency fund to cover your essential living expenses for up to a year. In regular times, 3-6 months may seem plentiful, but in reality, saving for an extended period may have proved necessary in the past. This money is a cushion to help you feel more financially secure should you lose a job, have a medical emergency for you or your pets, or experience a flood in your basement.

Invest these funds in liquid investments with easy access. With the lower-interest-rate environment, you won’t be earning much income from current yields, but liquidity–the ability to quickly have cash without much loss of value– matters. Please think of this as savings, so you don’t have to borrow on your credit card, which will make it hard to pay off high-cost debt.

Your emergency fund should be a big enough cushion to cover your monthly bills and expenses, such as food, rent or mortgage, utilities, health care, car expenses, property taxes, and pet care. Ample savings will allow you to sleep better at night.

3. Have A Budget To Stay On Plan

To be financially disciplined, you need to understand your monthly budget. Our combined income sources, less total expenses (fixed and variable expenses) equals our bottom line. Many people have had significant challenges from losing a job, having emergency medical costs, or both. When your income, fortunately, exceeds your expenses, you have money to save. This money can be added to your emergency fund, used to pay down debt, or invested for the future.

On the other hand, if your costs exceed your income, you will need to earn more income, borrow to pay expenses, reduce spending, or a combination of these. Bring down whatever costs you can. Borrowing on your credit cards will put you in a terrible financial bind. The interest costs of credit card debt have been higher in 2025, averaging in the high teens to 20%, and are destructive.

Plan to review your spending budget monthly.  Some people use spreadsheets; others use apps. Whatever way works for you to plug in your monthly pretax income less fixed costs, mostly your living costs such as rent, utilities, monthly car payments, insurance, typical food/grocery,  and other debt. 

Your variable costs are often discretionary and include dining out, entertainment, travel, and potential costs. Another way to budget is to track your monthly expenses by regularly reviewing your bills. You may be motivated to save once you see how much you spend on things you didn’t need.

4. Spend Less Than You Earn

Manage your spending. Invest your leftover savings. During the pandemic, we had fewer opportunities to spend as we hunkered down in our homes. We didn’t go on vacation, dine out much, and commuted less. Some people are spending more than they should, and should take it down a notch, especially if they are carrying debt. We spent more on groceries, subscriptions, and gaming platforms this past year. 

 On the other hand, US personal savings are starting to grow again towards the 2019 pre-pandemic rate. Increase your liquidity, so you can have more on hand and invest more.

There are reasons why we justify spending more than we should. We often prefer instant gratification, living today, but not focusing on our future. To be in good financial health, we should be doing both. Our emotional biases impact our purchases, and marketers leverage those tendencies. Our lifestyles and personalities play a significant role in overspending, especially when we want to impress people with our success.

5. How To Spend Less and Save More

When overspending habitually, we need to motivate ourselves to change our ways. When we diet, we often take a break and eat something we know we shouldn’t. If we correct that error, usually no sustainable damage has been done. There are many comparisons between saving and dieting. Sometimes falling off a diet means we have given up. The best thing is to dust yourself and get back on your diet.

If you realize your overspending is harming your finances, you may need some motivation to reduce spending. If your overspending and debt accumulation are severe, you may want to consider therapy or meeting with a financial counselor. Ever go into a store and buy something that you didn’t need? I have! Fight those biases that marketers use to make us spend more than we want.

Motivate Yourself To Spend Less:

• Focus on your financial future.
• Understand your household budget.
• Track and review your spending on items you may not need.
• Be more conscious of how you shop and the biases that interfere with your decisions.
• Negotiate any agreements you have if you are facing challenges.
• Cancel subscriptions you no longer need.
• Invest, pay off debt, or add to the emergency cushion with extra savings.

 

6.  Be Disciplined When Using Credit Cards

Having too much debt will make it difficult for you to achieve financial security and wealth. Make trade-offs that minimize debt accumulation. When credit card issuers charge 15% or higher on your balances, resolve yourself to spending less.

Pay your bills on time each month and aim to pay them in full.  It may mean making trade-offs between buying something you don’t need and may not even want very much. Carrying significant credit card balances is a substantial financial anchor and is a habit hard to break.

Instead, try to reduce your credit card balances to zero, so you never have to pay the issuer any interest owed. I consider credit card debt to be among the most toxic. Use more cash, which often limits your spending, or just buy less until you have more control over this debt.

7. Manage Your Debt Wisely

Like paying taxes, there is a certainty you will accumulate debt in your lifetime: mortgage, cars, student loans, smartphones, and credit cards. But you need to be prudent when borrowing money so it doesn’t interfere with your wealth accumulation. Where possible, pay down debt, particularly your credit card balances, which can be financial weapons of destruction. As interest rates come down in 2026, you may be able to refinance your loans.

The trade-off for extra savings should go to your emergency funds, high-cost debt, and investing your money.

Find Savings To Pay Down Debt From: 

• Annual tax refunds.
• Passive Income.
• Your annual bonus or a raise.
• Extra savings can help.

Some debt accumulation is associated with borrowing that is more like investing. Borrowing is not always a bad thing, especially for good reasons like your college education, furthering your career, or buying your home. As we mentioned earlier, credit cards are incredibly toxic.

 Refinance Your Mortgage

Current mortgage rates are around 6.3% well above the 2020 lows of below 3%. For those who bought homes in 2024 or 2025, it’s likely too early to refinance your mortgage loan, and you may need to wait until late 2026 or 2027.  

Several factors influence mortgage rates: the Fed’s actions, 10-year Treasury yields, interest rates, economic indicators, and inflation. While you can’t control external factors, having a higher credit score and a lower loan-to-home-value will contribute to more attractive mortgage rates.

8. Review And Fix Your Credit Report

As part of your New Year’s resolutions, make sure to review your credit reports periodically. You can do so for free through AnnualCreditReport.com. You can rotate among the 3 credit bureaus to examine your report every few months.

Lenders rely on our creditworthiness to determine our borrowing rates. The higher the score, the lower the annual percentage rate (APR) we are charged on car, mortgage, or private student loans. Check for errors you can fix quickly on your report and follow up with vendors when you spot those issues. These errors can hurt your credit.

9. Raise Your Credit Score

There are a few parties–landlords, employers–  that have stakes in our credit scores besides lenders. Improving your credit score can meaningfully help you reduce the total size of your debt (mortgage, car, and other loans) and provide financial security. Have a better understanding of how your credit scores are determined and how to raise them.

A Better Score Means Lower Interest Payments

A good credit score ranges between 700 and 750.  The difference in the APR based on credit scores is meaningful. The borrower buys a $500,000 home with a $100,000 30-year fixed-rate mortgage, resulting in a $3,120 monthly payment. However, if you had a credit score of 780-800, you may be able to do better than someone with a 625-650 score. 

10. Save For Retirement – Max Out Your 2026 Contribution Limits

What happens to your 401K, Roth, and traditional IRAs in 2026? You should contribute the maximum allowed in 2025 to your retirement plans, especially if your employer offers a company match, which is a valuable benefit.   

For your 401 (k) employer plan, the employee contribution limit increases to $24,500, with a combined limit of $72,000 for employees and employers in 2026. The catch-up contribution for employees who are 50 or older is up to $8,000, and those who are 60 to 63 may contribute another $11,250.

For example, your company offers a 50% match of your contributions up to 6% of your salary. Suppose you contribute 6% of your $55,000 annual salary, or  $3,300. Your employer will match 50% of their $1,650 contribution. The employer’s contribution is like getting free money.

As soon as you start working at a new job, you should enroll in your firm’s 401 employer-sponsored plan. Automate a specific amount or percentage of the money you receive from your paycheck to be deposited into your retirement, investment, or any savings account.  It’s an easy way to save consistently for your retirement to build this account through compounding.

Save as early as you can to leverage compounding benefits and for maximum contributions.

11. Essential Investing Lessons 

This has been an unusual year for investors, especially for AI technology infrastructure stocks, including the “MAG 7” stocks and other companies, like Nvidia and Broadcom, involved in partnerships that can help build out data centers, provide the essential electricity needed for the anticipated AI growth cycle, which will continue into 2026. 

 

A Few Lessons For 2026

• Stay invested, don’t bail when the market becomes volatile. 
• Use extra savings available to invest opportunistically in a down market as long those savings aren’t for living essentials.
• There may be new winners in 2026, such as healthcare, retail, REITs, energy, materials,  and other industries that were less robust in 2025. Determine what your taste for risk in the market.  
• There may be more IPOs, spinoffs, and mergers in 2026, with new companies to consider.

We advocate Buy/Hold strategies, rather than short-term trading. We recognize the excitement of day trading and long-term swing trading (which are different schemes) discussed here. On the other hand, “boring” long-term investment strategies take advantage of compounding returns, lower capital gains tax rates if you hold stocks for more than a year, and allow you to ride out market volatility.

12.  Review Your Designated Beneficiaries and Estate Plan

Chances are, if you are working, you have some assets. You likely received forms to complete at work, the bank, or online to designate beneficiaries. Beneficiary designations identify who your intended heirs are for most of your assets. These assets represent the non-probate property.  These assets can be efficiently and effectively transferred outside of your last will, overriding your estate planning documents. Don’t neglect reviewing your estate plan either.

The mistake many people make when designating their loved ones is that their designations may be outdated or unreasonable. You thought it was cute that your boyfriend selected you (or so he said), so you reciprocated by naming him.

If you don’t review your appointed beneficiaries periodically and at the same firm, you may still have your parents, siblings, and ex-spouse indicated as recipients. Review these forms regularly. You should review your documents after significant life events, such as the loss of loved ones, marriages, divorces, and births. Updating your records can usually be done online. We explain more about designated beneficiaries here.

14. Charitable Giving

It is essential to consider charitable giving. The pandemic and protests highlighted the divide between the wealthy and those less fortunate. Those who are luckier should give more each year.

Whatever the cause, charitable giving is a necessity. Others depend on us. As Winston Churchill said, “We make a living by what we get, but we make a life by what we give.”  

15. Be Grateful

Having a grateful attitude is always healthy. Let’s take time to be grateful for our loved ones, friends, colleagues, and those who would appreciate our recognition.  We made it to another year, and let’s be thankful.