By JB Beckett, Beckett Financial Group
As we head into 2025, many Americans are prioritizing financial stability by focusing on two key goals: building emergency savings and reducing debt. These steps are vital as the economy continues to recover, offering a safety net against unexpected expenses like layoffs, home repairs, or car issues.
A recent Bankrate survey found 44 percent of Americans say they can’t afford to pay a $1,000 emergency expense, and 1 in 4 report having no emergency savings at all—the highest percentage recorded since 2020. You don’t need me to tell you that life is unpredictable. But if you have little to no emergency savings, a sudden layoff, home repair, or car issue could cause a major financial setback.
If you’re ready to improve your financial health, here are actionable steps to help you save and pay off debt:
1. Set a Savings Goal
It’s hard to make a change without a purpose. In the new year, take some time to write down your financial goals. Set a target amount you’d like to have saved in your account and stick to it. A general rule of thumb is to have about three to six months’ worth of expenses saved in your account at all times.
2. Track Spending and Cut Costs
Once you have a savings goal in mind, the next step is to determine how your money is being spent. Go to your bank statements and track a month’s worth of spending. Of course, your end-of-year expenses might be inflated due to the holidays, so keep that in mind and aim to review a ‘more normal’ month if possible. The goal is to identify areas where you can make financial cuts.
3. Create a Budget
Creating a budget is one of the best ways to hold yourself accountable. Write down your expenses for the new year and be sure to include any raises, premium increases, and retirement contributions.
4. Develop a Debt Repayment Plan
Make a plan to pay off outstanding debt. There are many different strategies for paying off debt. The avalanche method, for example, focuses on paying off the most expensive debt first. With this method, you’ll list your debts from the highest interest rate to the lowest. Then, you’ll continue to make the monthly minimum payments putting any extra cash toward the debt with the highest interest rate. The snowball method has the same idea except you’ll focus on paying off the smallest debt first and work your way up. Debt consolidation may be another alternative, but should only be used if you can get a lower interest rate.
Why These Steps Matter
As you plan for the new year, make your finances a priority. Building a sufficient emergency savings fund can provide a nice cushion when the unexpected happens. Plus, it will help you avoid getting further into debt. If you’re struggling to save, or need help paying off debt, be sure to consult a financial adviser who can help you find solutions that will work for you.
Start 2025 with a focus on financial security. With clear goals and consistent effort, you can achieve a stable and stress-free financial future.
