10 Financial Resolutions for the New Year
A Practical Guide to Putting Your Life on Track for Success
The New Year is a great time to overhaul your financial life for the better, and one excellent place to start is by making good financial resolutions that can help get you closer to your money goals. Here are a few you might consider adding to your own personal agenda.
1. Know What You Want
Have a clear, concise financial goal for the year. It isn’t good enough to say, “I want to have my credit card paid down and more money in the bank.” Instead, you should write a financial resolution that is clear and actionable like, “I have the balance on my credit card paid down to $0, over $5,000 in my savings account, and a fully funded IRA.”
2. Prioritize Your Debts
Not all debt is equal. Make a list of your liabilities and organize them by the annual interest rate. Those with the highest rates (most likely your credit card debt) should be paid off immediately. It does no good to invest money while you are paying 19 percent or more in interest each year. In a lot of cases, the wisest course of action is to sell any certificate of deposits, savings bonds or other cash holdings and use them to pay the balance. Why? If you owe $10,000 on your credit card and pay 19 percent interest annually ($1,900 per year), while at the same time, own a $10,000 certificate of deposit at a bank, paying you 4 percent interest ($400 a year), you would actually save yourself $1,500 a year by making a resolution to paid the debt!
3. Open an IRA
If you haven't done so already, open and begin contributing to an individual retirement account. Your financial planner or accountant should be able to tell you whether a Traditional or Roth IRA is better for you.
Both offer important tax advantages that can add up to a significant amount money by retirement.