What are your 2017 New Year’s resolutions when it comes to your finances? You may have a few goals, such as “make more money,” or “reduce my debt.” You may even have decided that next year is when you’ll finally start saving for retirement in earnest.
These are all noble goals, but the problem is they’re too vague. This makes them more difficult to stick to and ultimately sets you up for failure. If you really want to improve your economic outlook and start retirement saving, here are some specific, practical, real life financial resolutions you can make to help you in the new year.
- Define Your Contributions If you have a 401(k), you’re allowed to put a maximum of $18,000 per year into the fund. That’s $1,500 per month. If you’re 50 or older, you’re allowed to put in an extra $6,000 per year in order to catch up, bringing the total to $2,000 per month. Is that the amount you’re contributing? If not, make arrangements with your employer to do so. IRAs and other retirement plans have their own contribution limits. Check to see which one matches your current situation and be sure you’re contributing enough each month to reach the maximum. It may seem difficult now, but if you’re not putting in as much as you can each year, then your nest egg is going to be lacking when you ultimately retire.
- Set Your Budget Figure out what your monthly paycheck will look like when you take out the $1,500 or $2,000 contributions, and budget according to that. You may need to tighten your belt a little, and give up a few luxuries, but it will help you to live within your means to know up front exactly what you can and can’t afford.
- Review Your Credit Report You’re entitled to one free credit report from each of the three major providers every year, and it’s in your best interest to get all of them. It’s important to know exactly what your credit score is and why, so that you can work to improve it. Even if your score is excellent, you’ll still want to keep track, in case anything happens to jeopardize it. Poor credit means you pay higher interest on loans, hurting your ability to save, which can undermine your efforts to plan for retirement.
- Reduce Your Credit Card Debt Now that you’ve figured out your monthly income and looked at your credit score, it’s time to take action to get yourself out of debt. What kind of credit card payments can you afford to make? What about other debts that need to be paid off? Don’t just pay the minimum amount each month, but instead work towards paying it off as quickly as possible. The sooner you get it paid, the less interest you’ll have to worry about. Don’t charge any more purchases, either, as this will negate your attempts to reduce the total. The last thing you want when you retire is for a portion of your fixed income to have to go towards paying off debts you accrued while you were working.
- Look at Your Insurance Needs How much life insurance do you have? Is it too much, or not enough? Your insurance agent will nearly always tell you that you need more, so consult an independent financial planner and have them look over all your insurance policies, to see where you’re deficient and where you can save.
These are just a few financial resolutions you can make to improve your economic outlook in the new year and help you with retirement saving. It’s important to plan carefully and know exactly what you can and can’t afford to do. The more specific you are with your resolutions, and the more you gear them towards your current financial situation, the better chance you’ll have of success, both now and in the long run.