Financial New Year's resolutions

by Chemain Evans

The arrival of a new year always begs the question: "Am I in a better financial position than I was last year?" This doesn't mean "Am I making more money?" because most of us find that as our income increases, our expenses do, too. What the question really means is "Am I making better, more-informed financial decisions than I was last year?" If you can answer a hearty yes, then hooray for you! However, the rest of us probably have room for some improvement. What follows are "Financial New Year's Resolutions" that you may be able to use to improve your financial position. Don't try to initiate them all at once or you will be too overwhelmed to accomplish anything. Select one or two that you can work on and build from there.

Resolution #1 - I hereby resolve to spend less than I receive through earnings or other sources of income.

This is probably the most important resolution you can make. Living within your means brings peace of mind. It also saves all that interest you may be paying. Many people find that using a budget to track their spending helps them to keep their spending within limits. If you don't have a budget, make one!

In addition, if you aren't carrying a large debt load, you should be putting aside a small amount of money each pay period and gradually working up to a larger amount. It is a good idea to work toward having 3-6 months' living expenses in an accessible savings account. This will be a cushion in case of medical emergencies, loss of job, etc. Remember that putting money aside does not mean that you can put an equivalent amount on the credit card if you run short! You'll pay more interest on your debt than you'll receive on your savings (which is why you should pay off high-interest debts before establishing a large savings account).

Resolution #2 - I hereby resolve to decrease my debts and not add to them any further.

Getting out of debt is probably the most popular resolution next to weight loss. With the average American household carrying thousands of dollars in just consumer debt, it's no wonder that many are seeking debt relief. Evaluate your financial situation and find "extra" money that you can apply toward debts. For example, let's say that every morning you spend $2 on a beverage on your way to work. That's $10 a week or $520 a year that could be put to paying off debts. Simple Joe even has a program that can show you the best way to eliminate your debts so that it takes the least amount of time and you pay the least amount of interest. Most importantly, vow to not add to your current debt load. Save up for things you would like to buy!

Resolution #3 - I hereby resolve to increase my financial education and apply it.

Learn more about your money and how to make it work for you. Read books, articles, magazines, etc.; attend seminars; investigate websites that teach you about money. Simple Joe's website offers links to several good books and articles to help you get going. Several articles offer expanded advice on many of the topics discussed in this article. Many books may be available at your local library. Start small - you can't possibly assimilate everything in one go around. Select one area of interest, such as budgeting or investing, and learn all you can about it.

Resolution #4 - I hereby resolve to start a retirement account if I don't have one. If I do have one, I will put more money into it.

Check with your employment to see if they offer a 401k plan and whether they match a percentage of your contributions. If they do match, that's like free money to you! Gradually work up to the maximum allowable contribution. If a 401k plan is not available to you, then find out about IRAs or Roth IRAs. Your financial institution can help you to understand the strengths and deficiencies of these two retirement plans, as can many websites. The most important thing is to be putting money aside for retirement. You don't want to have to work through your retirement years!

Resolution #5 - I hereby resolve to set up a will and trust.

If you own anything at all or you have children, you need to have both a will and a living revocable trust. Both of these help to express your wishes and protect your assets upon your death. Don't let that burden fall to your children. Estate taxes alone could eat up much if not all that is left after paying off your debts if your estate is not properly protected. Locate a good attorney dealing with wills and trusts to help you get going. Ask friends for references or call your local law university to find out who teaches this area of law there and whether or not he/she is in private practice as well. Expect to pay several hundred to several thousand dollars, depending on how complicated your affairs are. This is one of the few ways in which you can truly buy peace of mind.

Although there have been several ideas presented here, there are many more resolutions you could make to help out your financial position. The important thing is to pick something and get going. If it will help, write out your resolution and put it where it can remind you several times a day. Remember - if you're standing still, you're not moving forward!

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