Many people feel financial drained after the holidays. The start of a new year is the perfect time to shake off the post-holiday financial hangover and set clear, achievable goals that will strengthen your financial future. Small, manageable steps can lead to lasting change and with realistic objectives you can build a more secure and stress-free financial foundation in 2025.

Start with these three building blocks to lead to a more confident financial future:

  1. Build or boost your emergency fund -- Building an emergency fund can provide a financial cushion, ensuring you're prepared to handle the unexpected without derailing your other financial goals.

    Start by building a small cushion and aim to save three to six months of living expenses. Begin with a modest goal, such as saving $500, and gradually increase it until you've saved enough for a few months' worth of expenses.

    Automate your savings by setting up regular transfers from your checking account to a dedicated high-yield savings account, or arrange with your employer to have part of your paycheck directly deposited into a separate account.

    Reduce nonessential spending by cutting back on areas like dining out, impulse purchases or unused subscriptions/services.
     
  2. Tackle your debt strategically -- Choose a strategy that works for you, whether it's the avalanche method, which focuses on paying off high-interest debt first, or the snowball method, where you start with the smallest balance for quick wins.

    While making minimum payments on your debts, concentrate any extra money on your target debt. It's also important to avoid adding new debt by sticking to a cash-based budget and resisting nonessential purchases. Even if credit is available, using it can lead to higher costs over time due to accumulating interest.
     
  3. Give your credit score a boost -- Pay your bills on time by setting up reminders or enrolling in autopay to avoid missed payments, which can significantly impact your credit score.

    Experts recommend keeping your credit utilizing low by aiming for a ratio of 30% or lower. It's also a good idea to check your credit report annually to spot and dispute any errors. High credit utilization can signal financial strain to lenders and potentially lower your credit score.

Remember, resolutions are about making meaningful progress. Even small changes, like saving an extra $20 per week or paying off one credit card, can make a big difference by the end of he year. The key is to stay focused on your progress and celebrate the milestones along the way.

This message is provided by Iowa State Bank, in partnership with the Iowa Bankers Association.