Financial New Year's Resolutions

Improving one's financial situation is a popular New Year's resolution. But if you're too vague about what you mean by that, how will you ever know when you accomplish it?

Here are some more specific, actionable pledges that might help you achieve the results you’re hoping for. You can customize and quantify them into S.M.A.R.T. (specific, measurable, attainable, realistic, time-limited) goals to meet your needs.

1.      Reduce debt. Stop using credit cards for incidentals (groceries, gasoline, dining out, utilities, etc.) if you're carrying a balance. When you carry a balance, interest accrues as soon as each new purchase is posted, making everything you buy needlessly more expensive. Try to make more than the minimum payment each month on at least one card so you can whittle away at your debt. As soon as possible, zero out at least one card and then keep it current, i.e., pay the entire balance in full, on time, every month.

2.      Increase retirement savings. If you work for a company that has a 401k or similar plan and you're not contributing, start now. If you didn't max out your contributions last year, increase them for 2019. If you have eligible income but no workplace retirement plan, or you're already contributing the maximum, start or contribute to an IRA (Individual Retirement Arrangement). Also, it's not too late to fund an IRA for 2018; you have until April 15.

3.      Establish an emergency fund. Too many Americans are one paycheck away from homelessness. To keep from sinking into debt or wiping out your retirement savings if you're hit with a large, unexpected expense, start building an emergency fund. An emergency fund should hold at least six month's living expenses in a low-risk, liquid investment. Did you get some cash for Christmas? Instead of blowing it on toys, put it into a savings account or money market fund. Budget a little each pay period—even if you can only manage five or ten dollars—to build your emergency fund. Did you vow to give up or cut down on a vice like smoking, drinking, hitting the vending machine every afternoon? Put the savings realized from modifying those habits into your emergency fund.

4.      Review investments. It's a good idea to take inventory of your holdings periodically to ensure you're still on track. If you work with a financial planner, make an appointment to discuss whether any changes are necessary to keep your asset allocation in line with your goals and tolerance for risk. Open your statements promptly and read them. Ask questions if you don't understand something.

5.      Focus savings goals. The beginning of a new year is a good time to evaluate why you're saving money in the first place. A new home? College? Retirement? A trip around the world? How close are you to reaching those goals, and what do you need to change if you're falling short? 

      What financial goals have you set for 2019? I'd love to hear your comments.

For more saving and investment tips read Live Well, Grow Wealth.