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Quality Financial New Year's Resolutions
There is no better time to get your finances in order than at the beginning of a New Year. No matter what your other New Year's resolutions may be, you should make at least one of them financial. This will ensure that you come out of 2003 in better financial shape than when you entered and it will be a solid foundation for your saving in the future. The first step is to have a budget so you know the exact financial areas you need to aim your resolution toward.
Once you have your budget in order, you will want to make your resolution a real resolution and not just a want. Studies show that people who make firm resolutions are far more likely to accomplish their goals than those who just want to change, but never make a formal resolution to accomplish the goal. To make the chances of the resolution being accomplished even greater, make your resolution public. Write it down and place it where you and others will see it on a regular basis like the middle of your refrigerator door. Tell all your family and friends exactly what your resolution is so they can support you and help you even when things get tough so you aren't 100% on your own. If you can't think of anyone that you can tell, make the resolution on our discussion boards or email us (we'll be sure to check up on you to see how you are progressing) Again, studies show that by making your goal public, you are more likely to attain it than if you keep it to yourself.
While your specific resolution will depend on your particular finances, here are some general personal financial moves you can make that will leave you in far better shape when 2004 comes around no matter what your current financial situation is today.
Reduce Your Debt: We talk about this time and again at SavingAdvice.com and we will continue to do so until we get everyone on the right path. The fact is that if you are paying 18% on outstanding credit card balances and earning 3% on your savings, your savings is nothing more than an illusion. In reality, you are losing money every month. If you have outstanding credit card balances, paying off your credit card is like earning 18% interest (or whatever your credit card interest rate is) since you will be saving this amount by paying off the credit card balance early.
Even if you can't afford to completely pay off your credit card balances, resolve not to add anymore to the balances you already have. This will take some ingenuity and dedication on your part to cut down on expenses. In addition, you will want to make a plan to pay off the credit card balances as quickly as possible and may want to incorporate some savings games to help you accomplish this. If you do nothing else this year, resolve to pay more than the minimum amount due on all your credit cards every month.
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Fully Invest In Your Retirement Plans: Whether you have a 401(k) plan at work and/or an Individual Retirement Account (IRA), make sure that you give the maximum amount possible to your retirement plan. You can put aside up to $12,000 toward your 401(k) plan and $3,000 for an IRA this year (more if you are over 50 years of age). This money will grow tax-deferred and the earlier you begin to save, the greater the advantage you'll reap regarding the power of compound interest. If you don't have a retirement plan in place, make sure to resolve to open an IRA this year at the very least.
To maximize the benefits of compound interest and the historic rates yielded from the stock market, place your IRA into an index fund and set up a system to automatically withdraw money from your checking account every month. Even if you can only start with a small amount each month, resolve to do it. This will ensure that you get into the habit of "paying yourself first" and while you probably won't even miss the money today, you will be extremely thankful you started this year 20 years from now.
Refinance Your Mortgage: With interest rates near historic lows, resolve to see if refinancing your home loan makes sense. Even if you have refinanced in the last 2 years, it may make sense to refinance again if you can get a better rate without any closing fees. A few days of work could end up saving you tens of thousands of dollars, especially if you have not refinanced in the last couple of years. If you plan to stay in your house for five years or longer, search for a fixed-rate mortgage. If you plan on moving in the next five years, consider refinancing to a ultra inexpensive variable rate mortgage loan.
Compare Your Insurance Rates: If you haven't taken the time to review your insurance rates lately, resolve to do so. A few hours of your time comparison shopping could save you hundreds of dollars a year, especially if you shop both your home and auto insurance together. At the same time, ask to see all the different discounts the insurer offers. You may find that you qualify for a discount that you previously didn't or that another of your New Year's resolutions (such as quitting smoking) will also reduce your insurance costs.
Keep Your Car Another Year: Resolve to get out of the habit of financing your car purchases. If you have paid off your car loan and are thinking about purchasing another one, wait another year or more before doing so. Instead of making that car payment to the finance company, make that payment to a special bank account you set up for your new car. If you can resolve to keep your older car a few more years and make payments to your newly formed bank account, you will have created a system where you'll never have to finance your car again.
If you absolutely need a new car, resolve to make the new car a used car. By purchasing a car a few years old, you will take advantage of the steep depreciation the occurs during the first two years of ownership and will save thousands of dollars over purchasing a new car off the dealers lot. Even with all the 0% financing offers, passing on them for a quality used car will be in your long term financial interest.
By making any of the above resolutions (or all of them) and sticking with it through the year, you will find that you are in a much better financial situation a year from now. The base will be set and you will have the foundation you need to further increase your personal financial wealth.
There is no better time to get your finances in order than at the beginning of a New Year. No matter what your other New Year's resolutions may be, you should make at least one of them financial. This will ensure that you come out of 2003 in better financial shape than when you entered and it will be a solid foundation for your saving in the future. The first step is to have a budget so you know the exact financial areas you need to aim your resolution toward.
Once you have your budget in order, you will want to make your resolution a real resolution and not just a want. Studies show that people who make firm resolutions are far more likely to accomplish their goals than those who just want to change, but never make a formal resolution to accomplish the goal. To make the chances of the resolution being accomplished even greater, make your resolution public. Write it down and place it where you and others will see it on a regular basis like the middle of your refrigerator door. Tell all your family and friends exactly what your resolution is so they can support you and help you even when things get tough so you aren't 100% on your own. If you can't think of anyone that you can tell, make the resolution on our discussion boards or email us (we'll be sure to check up on you to see how you are progressing) Again, studies show that by making your goal public, you are more likely to attain it than if you keep it to yourself.
While your specific resolution will depend on your particular finances, here are some general personal financial moves you can make that will leave you in far better shape when 2004 comes around no matter what your current financial situation is today.
Reduce Your Debt: We talk about this time and again at SavingAdvice.com and we will continue to do so until we get everyone on the right path. The fact is that if you are paying 18% on outstanding credit card balances and earning 3% on your savings, your savings is nothing more than an illusion. In reality, you are losing money every month. If you have outstanding credit card balances, paying off your credit card is like earning 18% interest (or whatever your credit card interest rate is) since you will be saving this amount by paying off the credit card balance early.
Even if you can't afford to completely pay off your credit card balances, resolve not to add anymore to the balances you already have. This will take some ingenuity and dedication on your part to cut down on expenses. In addition, you will want to make a plan to pay off the credit card balances as quickly as possible and may want to incorporate some savings games to help you accomplish this. If you do nothing else this year, resolve to pay more than the minimum amount due on all your credit cards every month.
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Fully Invest In Your Retirement Plans: Whether you have a 401(k) plan at work and/or an Individual Retirement Account (IRA), make sure that you give the maximum amount possible to your retirement plan. You can put aside up to $12,000 toward your 401(k) plan and $3,000 for an IRA this year (more if you are over 50 years of age). This money will grow tax-deferred and the earlier you begin to save, the greater the advantage you'll reap regarding the power of compound interest. If you don't have a retirement plan in place, make sure to resolve to open an IRA this year at the very least.
To maximize the benefits of compound interest and the historic rates yielded from the stock market, place your IRA into an index fund and set up a system to automatically withdraw money from your checking account every month. Even if you can only start with a small amount each month, resolve to do it. This will ensure that you get into the habit of "paying yourself first" and while you probably won't even miss the money today, you will be extremely thankful you started this year 20 years from now.
Refinance Your Mortgage: With interest rates near historic lows, resolve to see if refinancing your home loan makes sense. Even if you have refinanced in the last 2 years, it may make sense to refinance again if you can get a better rate without any closing fees. A few days of work could end up saving you tens of thousands of dollars, especially if you have not refinanced in the last couple of years. If you plan to stay in your house for five years or longer, search for a fixed-rate mortgage. If you plan on moving in the next five years, consider refinancing to a ultra inexpensive variable rate mortgage loan.
Compare Your Insurance Rates: If you haven't taken the time to review your insurance rates lately, resolve to do so. A few hours of your time comparison shopping could save you hundreds of dollars a year, especially if you shop both your home and auto insurance together. At the same time, ask to see all the different discounts the insurer offers. You may find that you qualify for a discount that you previously didn't or that another of your New Year's resolutions (such as quitting smoking) will also reduce your insurance costs.
Keep Your Car Another Year: Resolve to get out of the habit of financing your car purchases. If you have paid off your car loan and are thinking about purchasing another one, wait another year or more before doing so. Instead of making that car payment to the finance company, make that payment to a special bank account you set up for your new car. If you can resolve to keep your older car a few more years and make payments to your newly formed bank account, you will have created a system where you'll never have to finance your car again.
If you absolutely need a new car, resolve to make the new car a used car. By purchasing a car a few years old, you will take advantage of the steep depreciation the occurs during the first two years of ownership and will save thousands of dollars over purchasing a new car off the dealers lot. Even with all the 0% financing offers, passing on them for a quality used car will be in your long term financial interest.
By making any of the above resolutions (or all of them) and sticking with it through the year, you will find that you are in a much better financial situation a year from now. The base will be set and you will have the foundation you need to further increase your personal financial wealth.