With the New Year 2017 here now, people find themselves again looking for ways to build financial resolutions to help them ultimately succeed. In a recent study involving over 5,000 American adults, the three resolutions at the top of the list were, in order: to save more, pay off debt and improve income.
Whereas enhancing savings and reducing one’s expenses make for a good beginning as well as bring lasting benefits, one need not stop there. For those who may feel their present financial status needs a makeover or simply want to change the way they deal with money, here’s 10 suggestions to formulate effective financial resolutions.
1. Set flexible objectives. Within the past 12 months, what major changes in your finances have you observed? Do you expect them to change within the following 12 months? Did you ever set any financial objectives before? If you are not certain, do not fret – this could be the perfect time to begin. Distinguish your objectives into two classes, long-term and short-term. After that, you can chart your own map to achieving both types of goals.
2. Establish a more efficient spending program. This is an indispensable and essential tip, one that must form as the foundation for each financial decision you will make. Write down all your expenses and subtract it from your salary to find out how you fare in your finances. Some of your expenses may have to be reduced to leave some money for vital needs while living within your means and fulfilling your future financial aspirations.
3. Set up an emergency fund. The same with increasing your savings and reducing expenses, setting up an emergency fund also strengthens your overall financial health. There will always be unexpected expenses along the way; however, being prepared reduces any adverse effects. Financial experts recommend putting aside an emergency fund to cover three to six months of your living expenses in case you lose a job or need medical attention.
4. Set aside money for a down payment. With the economic crisis limiting access to credit, buying a home, which is every non-homeowner’s dream, has become even more difficult. If you are one of those who have this long-term goal, save some of your money now. Be prepared to put down 10 to 20 % of the price of your dream house, depending on the real estate prices in your locality. Paying 20 % down payment allows you to waive a private-mortgage insurance; so make this your target level. While it is harder to achieve, it will help you follow the save-more/spend-less mantra in the long run.
5. Pay your big debts first. Although most people want to pay off all their debts, they fail to realize that not all debts have the same urgency. For instance, credit cards that charge high interests must be paid off ahead of others. Again, saving more money by spending less on interests is the rule.
6. Plan for your retirement. For many young people, planning for retirement may seem too early in the day; however, this misplaced attitude is actually counterproductive. In case you still do not have one, apply for an individual retirement account (IRA) – ask your CPA if a conventional IRA or a Roth IRA best suits your situation. Continue contributing to your 401(k) if your employer matches your regular payments. That is free money you can avail of for your benefit; so receive it by the good graces of your employer. Pay as much as you can on those contributions.
7. Regularly check your income tax situation and estate plans. Do you get a sizeable tax refund? Have you had changes in your tax payments? Do you receive only one income even though you are a two-income couple because you lost your job or went through pregnancy? Did you experience becoming self-employed after having been an employee previously or vice versa? Did you or your spouse retire and begin getting pension income or reach the wonderful age of 70½ and must now get mandatory IRA benefits? If so, you may have to adjust your withholding to avoid any adverse events. Moreover, you need not be so wealthy or own a yacht to need an estate plan. As long as you have assets, you need an estate plan. All the above questions will be answered sufficiently by your CPA; so, pay him or her a visit.
8. Be informed. Always be conscious about your financial well-being. Maintain a clean credit record, check your credit statements regularly and be aware of any changes. At the start of each year, resolve to read your credit reports. Monitor closely your bank account statements and credit card statements in order to avoid any imminent problems.
9. Seek professional help if needed. Ask your CPA once in a while in order to find out if you are well on your way to attaining your goals. When you need expert advice, get it; otherwise, do your share in keeping your finances on keel.
10. Wizen up. Although it is good to seek professional advice when needed, make sure you also know enough to take care of important decisions yourself. Get to know your financial situation and various investment opportunities. Attend seminars and classes; read books or magazines; and learn from others’ experiences and knowhow. Having sufficient knowledge allows you to have proper control of your financial welfare.