If making resolutions are part of your plans for the new year, make sure that some of them are financial. With a little bit of planning, your financial resolutions could begin paying off before you’ve abandoned your last diet or exercise-related resolutions –which is apparently before the end of February for most Americans, according to past U.S. News & World Report studies.
The key to creating an effective financial plan is to set realistic goals for both the short term and the long term. Instead of planning to double the amount you invest for retirement or deciding to pay off all your debt in the coming year, start with smaller steps that will help you gradually chip away at your financial goals –and which you are more likely to be able to stick with. Here are just a few of the things you can do to start the new year off on the right foot:
- Sit down and figure out your overall living costs, deducting your recurring bills such as mortgage payments, utilities, groceries and any of your necessary day-to-day living expenses from your net income to determine how much money you have to create a budget.
- Identify what your financial goals are and put them down in writing, making sure to include specifics such as paying off a car loan or cutting your credit card debt in half by year-end.
- Take time to review your credit card statements and monthly expenses to see where you can eliminate things and where you are willing to do so.
- Revisit your recurring costs to see if you can eliminate fees or cut down the costs of any regular services you pay for. For example –if your cable bill has slowly inched up, take the time to check with other service providers to see if you can get a lower cost package elsewhere or to see if your provider is willing to lower what it charges you if you are considering switching to a competitor.
- Automate wherever possible –whether this means setting up auto-pay to pay off your credit card bill in full each month and avoid paying finance charges, or whether you have $50 to $100 automatically removed from your salary each pay period and directed into an investment vehicle or savings account.
- Increase your retirement contributions. Even if you can’t set aside the 10% to 15% of your salary that financial advisors suggest each year, any amount to increase your long-term investments can lead to significant savings down the road because of the power of compounded growth.
Use one of the many online programs or mobile apps designed to help track your spending and keep you on track.