The new year offers the perfect opportunity to take stock, set goals and plan ahead. Although you can make all sorts of resolutions (“This is the year I get really fit!”), those who focus on their finances can literally pay more.
"Resolutions give you a moment where you can say, 'Am I doing what I'm supposed to do? And if not, what can I do differently?' said Walter Klisiwecz, former president of the North-Eastern New York Financial Planning Association.
Whether the goal is to build an emergency fund, pay off your credit card debt, get a more affordable car insurance policy, or save for a down payment on a house, there are steps you can take a lot,” says Klisiwecz.
Once you start to see small gains, you will feel encouraged to continue. Don't forget to reward yourself when you hit your goals (but don't blow your budget celebrating!). See how the experts recommend doing it.
1. Pay first
"The best way to save for a specific purpose is to implement a system that you don't have to think about," says Klisiwecz. Ask your bank to automatically transfer money from your checking account to a savings or investment account after each pay period.
If you don't see the money, you don't want to spend it. "Most people can adjust to whatever income comes their way," says Klisiwecz. "By automatically transferring money into savings, you force yourself to live on a little less."
2. Increase your financial IQ
Be smart about money by educating yourself through articles, books, seminars, and websites.
Focus on your goals and find out if there are any advantages that you might not enjoy. "Talking with your employer is a good place to start," says Todd Minear, an independent certified financial planner with Open Road Wealth Management in Kansas City, Missouri, an economics (HSA), which may be triple tax-exempt.
3. Eliminate unnecessary fees
Checking accounts, ATMs, and credit cards can have hidden fees that can add up over time. "The key is awareness," says Klisiwecz. "Look closely at your financial statements to see where your money is going."
Avoid withdrawing cash from ATMs that charge transaction fees, switch to a bank that doesn't require a minimum balance, and cancel credit cards that charge annual membership fees.
What happens to commissions for late payment or overdraft? "These are symptoms of overload or not taking care of money," says Klisiwecz. Get organized by setting up as many automated payments as possible so you don't get left behind.
For a little help staying on track, use online tools or apps that send you alerts when you hit designated thresholds.
4. Be smart about retirement
African-American woman saving money by investing Take advantage of your company's 401(k) retirement savings plan, if you haven't already.
And if there is a matching business, put in enough to guarantee it, usually 3% of your income. "The company game is how you get free money," explains Minear.
Consider increasing your contribution each year by 1% if you can, he suggests. If you don't have a 401(k) plan, consider opening an IRA or Roth IRA, or a SEP IRA if you're self-employed, and contributing as close to the IRS-allowed maximum as possible.
5. Protect your assets
Calculate your net worth and take steps to protect assets like your home. "Taking inventory is like climbing the ladder," says Klisiwecz. "It allows you to see how you are."
Make sure you have the right insurance, whether it's renters, homeowners or life insurance or a personal policy. "Do a home inventory by taking a video tour of your home," suggests Minear.
"If you have a fire or a robbery, you can prove what you have." Protect your online accounts with strong passwords and back up electronic information to an external hard drive that you store in a fireproof enclosure.
Although the new year is always a good time to step back and reevaluate, "any time is a good time to take control of your financial future," says Minear. "The earlier you can start, the better."