Yahoo Finance 4 Frugal Money Resolutions You’ll Regret in 2024
The end is near for 2023. That means that 2024 will be kicking into gear in a matter of weeks, so you might be coming up with some New Year’s resolutions. Certainly, money will be on most people’s minds. Will it take priority on your list?
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Financial planning is important no matter what year you find yourself living in, but there’s a chance you could be making frugal money resolutions that you’ll regret in 2024. Just because you are saving money does not mean you are using it well or helping your financial health.
GOBankingRates reached out to a few financial experts and managers to discuss the frugal money resolutions you’ll regret in 2024. Here’s how you can avoid making a mistake before the clock strikes midnight.
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Putting Yourself on a Shoestring Budget
The best way to save money is to cut back on your spending, right? Not necessarily. Just because you scale back your budget does not mean you are actually adding to your bank account.
“While the desire and effort to cut back is great, if you put yourself on too slim of a budget, it will likely become too difficult to maintain long term and potentially lead to you giving up on a tighter budget altogether,” said Carla Adams, CFP, founder and financial advisor of Ametrine Wealth.
“It’s akin to why people fail at extreme dieting after a few weeks,” Adams said, comparing it to another commonplace resolution. “Do yourself a favor and slim down your budget with a more realistic goal that you’ll be able to stick to.”
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Paying Off Your Low-Interest Mortgage
You might have an outstanding loan on your house, so it’s best to pay that off and take it off the books. Think again and more importantly: how low is your low interest rate on the mortgage?
“Many people love the idea of owning their house free and clear and rush to pay off their mortgage far sooner than the end of the mortgage term by making extra principal payments,” Adams said.
While mortgage rates are much higher these days, many homeowners bought their homes or refinanced their mortgages when interest rates were very low.
Adams suggested, “If you have a low mortgage rate, say 4% or less, my advice is to make the minimum payment each month and put whatever excess money you were planning to pay each month in a high-yield savings account, treasury bonds or the stock market.”
Setting Money Goals Without Rewarding Yourself
Let’s say one of your resolutions is to increase your credit score by 30 points in 2024. You are giving your all and you reach that goal in July. Should you treat yourself to a fancy meal at a classy dining establishment or buy that slightly pricey item in your online shopping cart?
“Absolutely!” said David Bakke, money management expert at DollarSanity. “Resolutions without rewards will feel hollow on the back end and you’ll be that much more unlikely to give it your all in the future.”
Bakke reflects on the hypothetical scenario of raising your credit score, noting that “one-time expenses will be pennies on the dollar in terms of the benefits you’ll receive by raising your credit score.”
Forget Your ‘Set It and Forget It’ Saving Method
Lots of people want to save money, so they set up a “set it and forget it” system between their payroll and their bank. Each paycheck, a certain amount is set to go into their savings account and they forget all about it until looking at the amount accrued after some time.
Christopher Manske, president and founder of Manske Wealth Management, says this is not the best way to save money.
“You don’t want to fall for this illusion; because, when you pay a fixed amount to your savings out of your checking account each month, it’s highly likely that you will spend the rest.” Manske said. “The way to see through this illusion is to flip the script on the ‘money magicians’ by depositing everything you earn into savings right at the start.”
Manske said, “Ideally consumers should have at least three bank accounts”: a main savings account, a checking account for bills and a third one for “important purchases you’ll be making in less than three years.”
“Once you have over six months’ worth of expenses saved,” he said, “you can start allocating the extra to future goals.”
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This article originally appeared on GOBankingRates.com: 4 Frugal Money Resolutions You’ll Regret in 2024
