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As December comes to a close, many of us are thinking about what resolutions we’d like to make for the new year. That said, it isn’t always easy to know what goals we should set for ourselves, especially when it comes to improving our finances. Thankfully, there are some steps you can take to make sure you choose the financial resolutions that are best for you.

1. Reflect on the Past Year

You may want to take some time to look back on this past year and think about how you did financially. Did you find yourself paying off or taking on more debt? Did you increase your savings contributions or cut back? Do you feel more confident or worried about your finances moving into the new year? You may not like all the answers, but asking yourself these types of questions can help you determine what goals you want to set for the future.

2. Know the Difference Between Your Financial Needs & Wants

Knowing how to differentiate between your financial needs and wants can help you decide what goals are best for your particular situation. For example, someone who’s struggling with debt may want to focus on a goal that would help them boost their cash flow as opposed to one that would help them save more money for a big vacation. Ideally, you’re going to want to make sure the majority (if not all) your financial needs are attended to before indulging in your wants.

3. Take a Look at Your Credit Score

Your credit score is one of the best ways to evaluate your financial wellbeing. Checking your score can help you determine whether or not you may want to set a goal to lessen your credit utilization, make your payments on time and a lot more.

You may also want to consider giving your credit report a look. Doing so could give you a better understanding of how your financial behavior affects your credit score. (You can pull your credit reports for free each year at AnnualCreditReport.com and get your credit scores for free each month on Credit.com.)

4. Keep It Simple

One of the most common mistakes people make when choosing New Year’s resolutions is setting unreasonable expectations for themselves. While there’s nothing wrong with wanting to save $1 million or retiring at 30, these aren’t goals that can easily be achieved in the span of a year. If you find yourself making goals that are outside the realm of reasonable possibility, consider breaking them down into more easily obtainable bite-sized chunks. Not only will this help you develop positive financial habits, but the more frequent success will also help fuel your mission to achieve financial wellness.

Self-improvement is rarely easy, but picking a resolution is a great way to get the new year started off on the right foot. Keep in mind that, even if you hit some road bumps along the way, a little mistake here and there shouldn’t keep you from achieving your goal. A little positivity and determination can go a long way!

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