The popular resolutions to spend less and save more seem simple, but actually realizing those goals requires commitment, planning and a willingness to follow through. A new year brings you a fresh opportunity to get your finances under control and better secure your future. Kick-start 2017 with these five New Year’s financial resolutions:
Eliminate Your Debt
Paying off your debt sooner rather than later should be your top priority. If you owe money on several accounts, prioritize in order of highest to lowest interest rates when making your payments. This method of paying down debt, called the debt avalanche, saves you the most in finance charges. Credit card debt will likely have the highest interest rate and should be tackled first. You can also try eliminating small debts to help you build a little confidence (this is called the debt snowball method). Crossing a debt off the list is a good way to motivate you to pay off other outstanding balances.
Start an Emergency Fund
Put some money aside for surprise expenses that might pop up during the year or to give yourself a cushion in case you lose your job or another event affects your ability to make money. Most experts recommend saving at least three to six months of expenses.
Put Money in Retirement Accounts
It’s a good idea to start planning for retirement as early as possible. Set aside money for your golden years by contributing to an IRA, 401(k), 403(b), or even a savings account. Putting at least 10 percent of your income into retirement accounts is recommended, but if you have to start smaller, that’s okay. Just start. You can gradually increase your contributions over time as you make more money or get more comfortable budgeting.
Craft an Investment Strategy
Many people do not know what investments they have or how to handle them, so it’s important to take some time to understand where your money is. Start your new year by taking stock of your investments and figuring out how they work. From there create an investment strategy that will meet your goals. Consider hiring an accountant to help you to understand and diversify your investments.
Build a Budget
No list of New Year’s financial resolutions would be complete without a budget. It doesn’t have to be fancy: a simple list of your income and expenses will get you started and can be expanded later on. You can hand-write your budget or download a free budgeting tool like Mint.com to organize everything. Keep your budget in an easily accessible place so you are reminded of the financial goals you’ve set and your commitment to them. Adhering to a budget over the course of the year will be the hardest part. Take a few days to gather the information you need, such as your salary information and household expenses to make the most accurate budget you can. No need to rush it. Over time you will continue to refine your budget as your life and your means change. Don’t forget to look for spending areas where you’re paying too much, and try to trim those categories.