Common Sense Financial New Year’s Resolutions
Now that your holiday spending spree is over, it time for making New Year’s resolutions. Follow these eleven resolutions and your financial future will be bright.
Accept responsibility for your financial health
Even if you rely on a financial advisor, a trusted friend or family member, it is you who ultimately will either benefit or suffer from the financial actions that are taken on your behalf. The sooner you do this, the more time you have to achieve your financial objectives. If you haven’t determined your objectives now is the ideal time to define them.
Resolve to improve your finances
Unlike quitting smoking, going on a diet or vowing to exercise more, some of the more popular New Year’s resolutions, this is one you should stay with. This means developing a plan whose objective is to improve your financial health. This means identifying and implementing opportunities to increase savings by a combination of reduced spending and increased income.
Determine your financial health
Unless you know your financial assets and obligations as well as the sources and uses of your income, it is impossible to plan for your future. Every plan needs a starting point as well as an end point.
Define your tolerance for risk
While all of us are amenable to profits from an investment or fortuitous circumstances. All of us have different tolerances to risk. We would clearly not tolerate losing all our money. What about a 10 percent loss; 20 percent; or 30 percent plus? The message here is do not invest more than you are comfortable losing. Remember past performance is not indicative of future results.
Take advantage of lower gasoline and heating oil prices
Instead of spending the money that you are saving on these items, consider this as an opportunity to put those savings into a retirement account or rainy day fund instead of using these savings to increase consumption.
Ask yourself what if
It is more important to plan in advance how you would respond to an unexpected loss of income and / or expense. All of us can deal with an unforeseen windfall. The time to develop your plan is when you don’t need it not during a financial setback. This plan should identify sources of income and spending reduction opportunities. Sooner or later most of us will face a financial crisis of some magnitude.
Don’t over extend yourself needlessly
While it may be gratifying to get that new Mercedes Benz, you are going to have to pay for it. Unless you can comfortably afford to pay for it, it would be wiser to defer that expense or select a more affordable alternative vehicle.
Manage your Credit Card Usage
Credit cards should be used only as a matter of convenience not as a mechanism for spending more than you can afford. Unpaid balances, even in this environment of low interest, carry high interest charges. If you have any unpaid balances, resolve to not add to the problem and develop a plan to eliminate them
Anticipate Your Financial Needs
It is better to plan for future financial needs than to incur expenses that you have no idea how to pay for. If you will be sending a child to college in ten years, it is easier to save over ten years than to pay when the child enters college. Similarly, the more years you have to fund your retirement needs the easier it will be to achieve the retirement lifestyle you have planned for.
Take Advantage of Employer Sponsored Retirement Programs should you be fortunate enough to work for a company that offers a 401k or other retirement savings plan, it is in your best interest to take advantage of the program.
Your contributions reduce your taxable income thus saving you money on the taxes that you would have had to pay had you not made those contributions. In those plans where there are employer matching contributions, you are being paid tax free by your employer to save.
Don’t put off for tomorrow what you know you should do today. While mundane things such as dealing with your finances is not as exciting as watching that football game, it, in the long term, will provide you more than the thrill of victory or the agony of defeat of your favorite team.