New Year, new budget. Here are 10 financial resolutions that can help you put your financial cards in order this year.
Create or update your net worth statement. To do this make a list of everything that you own – savings, investments, house, car etc. Then make a list of all your debts – loans, credit cards, mortgage etc. Subtracting your debts from your assets gives you your net worth. Use this as your baseline for monitoring your progress over the year.
Make a Budget
And be realistic about it. This is the best time to take a fresh look at how you are spending your money. Make a list of your expenses and subtract this from your income. Prioritizing your spending can help you to cut back this year and help you to make saving part of your budget.
Having a filing system or spreadsheet can help you keep your resolutions in check. Maintaining a comprehensive calendar of bill payments and deadlines will als help you to stay on task when it comes to paying your bills on time and within the limitations of your budget.
Make realistic goals. Make a list of what you would like to save for and put a price on each item. Prioritize these goals and create a time line of when you should achieve each one. When goals are specific and measurable they are easier to achieve.
Get in Control of your Debt
If you’ve calculated your net worth then you know exactly what you owe. Now is the time to stop shopping with your credit cards. In an ideal situation less than 28% of your pretax income should go towards your mortgage while no more than 36% should be allocated for all your debts combined. New years is also a good time to consider debt consolidation if you find yourself in an overwhelming financial situation. Take charge of your debt and resolve to get rid of your credit cards.
Create an Emergency Fund
As a goal you should start to save up enough money to cover 3-6 months of expenses in a savings account that can be accessed. Do not touch this money unless you absolutely HAVE to. (ie: lost your job, became ill, etc.)
Put Money Away for Retirement
Contribute to a retirement plan (401K, RRSP, employer plan) and keep adding until you reach the maximum. Progress towards your retirement goals by continuing to contribute each year.
Review your Investments
Check that your investment portfolio still reflects your financial situation. Buy and sell investments to refine your portfolio if necessary.
Take a Look at your Insurance Policies
A quick call to your insurance representative may reduce your premiums. Check to make sure that your health, auto, home, or tenants is still reflective of your life. Make adjustments where applicable.
Write an Estate Plan
Create an estate plan or modify your current plan. If you have had a new baby, married or divorced recently you will want to review your beneficiary designations.
New Years resolutions are easier to achieve when you have a well put together plan. Cheers to a happy, healthy and financially rewarding year!