According to a 2015 University of Scranton survey, the third-most-common New Year’s resolutions are money-related. (Number 1 is self-improvement and number 2 is weight-related.) The specific kinds of financial resolutions vary quite a bit, but a few things appear on most people’s lists. In general terms, these can be grouped into two categories — spending less and saving more.
At the top of the spending-less list you often find debt reduction, especially credit card debt reduction. The reason for this is that the money you pay in interest could be used to increase savings. And credit card debt normally includes very high interest rates. There are a number of ways to reduce credit card debt, such as debt consolidation under a lower-rate loan. Such lower-rate loans often include new credit cards with low or no-interest teaser rates. Another common approach is a secondary mortgage since rates are still pretty low and the interest is tax deductible (if you itemize).
There are two common saving-more resolutions. One is creating a rainy-day fund. This is a readily-accessible pool of money that can be used when one of life’s surprises pops up. This can include unexpected medical expenses or job loss. Experts typically recommend having 3-6 month’s salary in such a fund. Another popular way to save more is by increasing the amount you contribute to your employer-matched retirement account. A 401(k) is an example of such an account. The reason for this is simple. Many employers either partially or fully match the amount you put in (up to some limit). If they fully match your contribution, your investment immediately grows by 100%. You won’t find such guaranteed growth anywhere else!
Of course, the best resolution for you might be something else. For example, maybe you want to decrease your taxes, save for college, increase your charitable contributions or increase the amount of life insurance that you have. Guidepost Financial Planning can help you review your financial situation and determine the best financial resolution for 2016. Please visit our website or give us a call at 970.419.8212 so that we can discuss your financial goals in a no-charge, no-obligation initial meeting.
This article is for informational purposes only. This website does not provide tax or investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Please consult your tax or investment advisor for specific advice.