We all know it’s important to have a plan for our money. The New Year is a great time to take a look at your finances and see what changes you should make to improve your financial future. And while everyone has different financial goals, here are five New Years Resolutions everyone can stick to.
Create your budget
The first step to having a well-run financial life is to create a budget. To do this, make a list of all your expenses and categorize them. Create a plan to save money for emergencies and retirement, as well as to save for big purchases. And don’t forget that you can spend a little extra cash on yourself as long as your budget stays in balance.
Create an emergency fund
An emergency fund is essential to keep your budget on track. This should be the equivalent of at least three months of living expenses so that you have cash for an unforeseen emergency.
Shit happens. And when it does, you’ll be glad you had a little stash for a rainy day. While an emergency fund doesn’t need to be as large as your retirement fund, you should still aim for an amount equal to three to six months of spending.
If you can’t put that money aside now, make a plan to start the new year. Setting aside money to cover unforeseen costs will help you avoid getting into debt and keep your finances healthy.
Make additional payments to eliminate debt
To get out of debt faster, try making extra payments each month to cover your debt. This will help lower the overall interest you pay on your debt and increase your credit rating faster. It’s also a good idea to spread your debt evenly among all types of debt – credit cards, weekend online loans, auto loans, student debt, etc.
Monitor and improve your credit score
Maintaining a good credit rating is the key to ensuring you get the best interest rate when you need to borrow money. To do this, make sure you pay your bills on time and check your credit score at least once a year.
You can also get free annual credit reports from the three major credit bureaus by logging into Annual Credit Report with your federal or state tax identification number.
Increase your pension contributions
Now that you know how much you earn each month, it’s time to start saving for retirement. The earlier you start saving and the more money you put aside, the more money you will have in retirement. Try to save at least 10% of your monthly income if possible.
If your employer offers a 401 (k) or similar plan, try to contribute enough to receive any consideration from the employer they are offering. Otherwise, open a Roth IRA and / or invest in other types of tax-advantaged retirement accounts through your business or on your own.
And remember, if you’re self-employed or don’t receive a paycheck, you can still invest in a taxable account. There are many low cost investment options out there today that will do just as well as their investment firm counterparts.
Whatever you decide to do, don’t let the New Year go by without making some changes to your finances. Know yourself and what your goals are, find ways to achieve them, and build a solid financial foundation for yourself this year.
The bottom line
It’s time to make some changes to improve your financial situation. Make sure you put these five resolutions into practice to see the positive results they will have in your life.
The best times to practice frugality and save money are during downtime. The best time to start saving for retirement is when you’re young and have plenty of time to invest. And the most effective way to make additional payments on your debt is to set up a budget, an emergency fund, and an automatic payment plan.
The key to any financial success this year is staying motivated and reviewing what you’ve been doing over the past year. If you succeed, then you will have the best chance of succeeding where your goals take you.
This article does not necessarily reflect the views of the editors or management of EconoTimes.