Simple resolutions you can keep
Jan. 1 is as good a day as any to confront your financial New Year’s resolutions. Yes, you’d probably like to put it off until Jan. 2, but that’s what you did last year. Then Jan. 2 turned into the Jan. 3 and then it’s July, and you might as well wait until next year. For 2017, seize the day and make your resolutions on Jan. 1.
When it comes to resolutions, most people know where their finances are weak. Maybe you don’t save much, carry too much credit card or mortgage debt, haven’t reviewed your investments in five years, or never put together a budget. Any one of these items is worthy of a New Year’s resolution.
Yet, most people make resolutions and don’t stick to them. The problem is they usually bite off more than they can chew. They see several areas that need improvement and decide to improve them all at once. While that’s admirable, it often leaves people feeling defeated when they realize they aren’t getting any of them done.
The key is to pick one item and get it done. Give yourself a victory, and feel good about it. Then move on to something else if you have the time and motivation. Here are a couple of resolutions that can improve your finances and keep you moving down the road to financial independence.
Savings. In general, most people should be saving at least 10 percent of their pay. While it’s hard to reach a 10 percent rate, one simple thing many people fail to do is save enough to get the company match in their 401(k) plan. That match is part of your compensation, and it’s going to help you get to that 10 percent goal. For instance, if your employer matches 3 percent, then you only have to save an extra 7 percent. If you don’t know what the company match is, contact the HR department and find out. Save at least the amount needed to get the match, and if you can do more to round up to 10 percent, even better.
Debt. Debt reduction is like going on a diet. You know you binged, and now comes the hard work of shedding the excess. But just like losing weight, a crash diet doesn’t usually produce sustainable results. Go on a reasonable debt diet by consistently chipping away at small amounts. If you carry a credit card balance from month to month, that’s the first thing to pay off. Figure out how much extra you need to pay each month to get rid of it in three years, and at least start there.
If you have a mortgage, it’s a good idea to have it paid off before you plan to retire. Figure out how much extra you’d need to pay each month to eliminate your mortgage by the time you plan to retire, and get going. If you don’t know how to do this, call your mortgage company and ask them for the number. You’ll feel great knowing you’re on the path to owning your home free and clear at retirement.
Budget. This is a word most people have never embraced. If you run a business and don’t have a budget, then expect to lose money. If you run a household with no budget, then expect the same result. It doesn’t have to be a fancy budget, anything that lists all your income and expenses will do. Then you’ll be in a position to cut what’s unnecessary.
Good candidates are things like excessive cable and mobile phone bills, too many take-out dinners, a few too many trips to the physical or electronic mall, pet grooming bills (you can do this at home) and expensive vacations. Oh, and next time you buy a car, go with something basic, it can save you tons of money.
Remember, pick one thing, get a victory and break the cycle of feeling like your finances are out of your control. That’s a good New Year’s resolution.