A new year is upon us, and along with the horns and the bubbly, it’s the end of a financial year. Want to know how much you saved this year? You can tote it up now. Want to know how much you reduced or expanded your debt? Ditto.
The satisfying conclusion of an old year and the beginning of a new year is just one reason it’s a great time to make financial resolutions.
Another reason, of course, is that New Year’s is a traditional time to make resolutions!
Personal finance experts are like everyone. They make resolutions, too, and they share those ideas with us. Here are six:
1. Prioritize Your Debts
Joshua Kennon advises folks to prioritize their debts. If interest rates go up in 2017, the climb will hit your pocketbook directly if you have debts. Think your credit card interest rate and payments are high now? They can rise along with increasing interest rates.
Sit down and go over the fine print for any credit cards. Do the same for other kinds of debt, such as car loans, mortgages or student loans. How much interest are you being charged per year? The more you’re being charged, the more you can save by paying it off. Make a vow to pay the more expensive debt off fastest.
2. Open an IRA
Kennon also recommends opening an Individual Retirement Account (IRA) if you don’t already have one. First, everyone is going to retire someday. Social Security will not cover all needs for the vast majority of people. You will need your own funds, and an IRA builds them into the investments of your choice.
Second, an IRA is tax-deductible. If you have an employer-sponsored plan or are self-employed, the money can be taken out before it is taxed. That saves you money as well, and it may lower your tax bracket. Many employers will also match an employee’s contribution to an IRA. If your employer will match anywhere from 25 percent to 100 percent, you are leaving money on the table if you don’t participate.
3. Assess Your Investment Strategy
CNN advises a year-end/year beginning assessment of investment strategy. If all your investments are bank savings accounts, for example, assess whether your long-term goals might be more easily met by investing in the stock market. If you’ve been in the stock market all year, do you have some that have done really well? It may be time to take some profits.
The three divisions of investments are cash, stocks and bonds. Assess where your investments lie. If you have most of your funds in one category, consider moving your money around accordingly to be more balanced.
4. Buy or Save for a House
Andrew Josuweit recommends a big one: buying a house. Buying a house is one of the best financial moves anyone can make. It makes you, eventually, the owner of the roof over your head That alone is priceless. You’re no longer throwing money at rent, which ultimately gets you nothing in the long term.
The purchase of a house also entitles you to take tax deductions. Deductions can reduce the amount of tax you pay, putting more in your pocket. Finally, of course, house prices can appreciate. If your home is worth more than you bought it for, you can sell it for a profit if you wish.
Down payments on a house are usually 20 percent of the purchase price. If you don’t have enough now, it’s a good idea to make one of your 2017 resolutions beginning a fund for a down payment.
5. Create an Emergency Fund
Josuweit also recommends having a savings fund for emergencies. Statistics indicate that almost half of all Americans couldn’t come up with $400 for an emergency if they had to. Does $400 sound like a lot? Think of it this way: It’s one car repair. It’s part of a new heater or refrigerator. It’s a medical bill’s deductible.
As a result, an emergency fund specifically created to cover these type of events is a very good financial resolution. Methods abound. One suggestion is every week, drop the change in your wallet into a piggybank. You can also determine a monthly percentage and stick to it.
6. Reduce Spending on Food
If you need to reduce your spending to enact some of these resolutions, focus on food-related costs. People in the U.S. shell out $58.9 billion on groceries and $57.5 billion at restaurants and other away-from-home venues. Cutting back on food costs is one of the easier ways to pare spending. Rent and mortgage costs are not flexible, and car and gas costs are often not, either.
So, if you eat out twice a week, cut it down to once a week. If you buy a lot of prepared foods at the grocery store, cook more. Eat inexpensive cuts of meat and vegetarian meals, which can be less expensive.
It’s a new year. Will it be a new financial you? It could happen with these financial resolutions.