We all know the drill when it comes to making New Year’s resolutions. Whether we put pen to paper or make a mental mark, what usually tops most people’s lists are ways they can improve themselves physically – get more exercise, cut back on alcohol — eat more kale. But what about getting our finances in shape?
Reassessing your money situation at the start of a fresh year is a good way to boost financial security. According to a recent survey, about 4 in 10 Americans made financial resolutions for 2016. Among these folks, about 60% met or exceeded their goal.
That’s a pretty encouraging number – encouraging enough to make it worthwhile to come up with a financial plan of action for 2017.
The surveyors also asked participants to describe their top financial resolution. About half of the respondents said they want to save more. A third of the respondents pointed to paying off debt, and the rest said they wanted to spend less money. All of these intentions are great ways to keep our financial affairs healthy. The question becomes one of action: what’s the best way to achieve these key goals?
Take a look at the list below for some concrete strategies to help you keep your financial New Year’s resolutions on track for the entire year:
1. Make a solid budget (and stick to it): The more detailed your budget, the better. Take a look at your income and expenses, and figure out how much you want to put into categories of expenses, like entertainment and eating out. With each paycheck, allocate savings and money for debt reduction first, and then divvy up the remainder.
2. Tackle high-interest debt first: Not only is high-interest debt a stress to our financial system, it can keep us from achieving our long-term financial goals. We all plan to save money for our kids’ college fund, but doing so while carrying credit card and other high-interest debts makes this challenge even tougher. So address this debt first, even if that means taking a part-time job or posting a room on Airbnb.
3. Create or build your emergency fund: Life can take some unexpected turns, and some are more expensive than others. A safe approach to handling financial bumps in the road is to sock away six to nine months’ worth of living expenses (think housing, utilities, food and insurance). Keeping your safety net intact and easy to access in a money market account.
4. Take advantage of your employer’s retirement plan: Sure, Social Security will pay you a monthly benefit when you retire, but living comfortably on this amount alone proves tough for most. Start supplementing your retirement income by maxing out your 401(k) contributions for the year. The limit for 2017 is a cool $18,000 for those under 50, and $24,000 for people 50 and older.
5. Set up or funnel money into an existing IRA: Traditional IRA’s reduce your taxable income up front, and Roth IRA’s provide tax-free income in retirement. Find out which type of fund makes the most sense for you and be intentional about funding it. Contribution limits for 2017 are $5,500 for folks under 50, and $6,500 for those of us 50 and older.
6. Shop for savings: Try negotiating better deals for services that you need. See if you can save a few dollars by switching cable providers or insurance carriers for your home and car. Consider raising your deductibles on insurance policies to save even more. Shopping these services during the year could save you a few hundred dollars.
7. Teach the kids about money and investing. Children who learn the value of money and the importance of saving will be better prepared for the adult world. Consider dropping that weekly allowance in favor of payments for assigned chores that are completed well. This helps kids learn the connection between work and money. Require them to save a set percentage of all their “income” – allowance, chore payments, monetary gifts. Teach your older kids about investing by establishing an Motif account, which will allow them to buy individual stocks thematically, based on their interests and brands they recognize – electronics, gaming, sports, aerospace – most anything.
Embrace even just a few of these changes and your 2017 could be both Happy and Prosperous.