Keep your money resolutions
Nine strategies can help you reach goals
07:40 AM CST on Monday, January 7, 2008
By PAMELA YIP / The Dallas Morning News pyip@dallasnews.com
"Now it's time to get down to business. What do you really want to accomplish financially for 2008? Pay off debt? Save more money?
Whatever your goals are, how you lay them out and work toward them will determine whether you will succeed.
"There's no substitute for self-discipline," said Greg McBride, senior financial analyst at Bankrate.com, a personal-finance information Web site. "At the end of the day, your effort to improve your financial standing will only work if you can stick with those strategies throughout the year."
Here are the most important things you should do to make 2008 a financially successful year:
1. Make sure your goals are realistic. "Start small," said Rick Salmeron, certified financial planner at the Salmeron Financial Network Inc. in Dallas. "One reason many money-conscious resolutions fail is because we bite off more than we can chew. Don't try to do too much at first."
Write down your goals because seeing them on paper makes them more concrete and gives you a higher chance of success.
2. Be specific about your goals. "You might be planning on setting a goal related to investing, which is important but very vague and easy to forget about," said Casey Kupper, a certified financial planner at Quest Capital Management in Dallas. "Instead, state that you're going to invest a certain amount each month. Take your resolution of 'I'm going to invest this year' to 'I'm going to invest $250 a paycheck into my 401(k) this year.' "
Tell your friends and family of your goals because they will help hold you accountable.
3. Pay off or pay down your consumer debt. Whatever your goals are, you will be seriously blocked from achieving them if you're shouldering mountains of credit card debt.
To get rid of your debt, reduce your spending or increase your income. The ideal is to do both, but the more important component is to cut your spending.
No amount of additional income will be effective if you continue to spend more than you make. You'll constantly be behind.
Stop using credit cards for anything other than necessities. Use them only in an emergency or in a situation where you have to use one to reserve a hotel room, rental car and the like.
Even then, use the card only if you know you can pay the bill off on time and in full.
Before you make any purchase, ask yourself whether you really need it, and whether you can pay for it with cash. If your answer is no to both questions, skip the purchase.
Don't expect instant relief from debt.
"If you have debt, realize that it took you a while to get into debt, and it will probably take you longer to get out," said Bill Hardekopf, chief executive of LowCards.com, a credit card information Web site. "Do not get discouraged, no matter how much you can pay off or how long it takes. Being debt-free is worth the effort."
4. Start a savings program, no matter the amount you're able to put away. Getting rid of your credit card debt will enable you to save more, but there's no shame in saving $20 to $30 each paycheck if that's all you can afford. The key is to continue saving consistently and let that money grow.
Make it easy on yourself by signing up for an automatic savings plan that enables you to have a fixed amount of money transferred regularly to a high-interest savings account.
"The biggest obstacle to saving is not being in the habit of saving," Mr. McBride said.
As you see your account grow, "that becomes self-reinforcing," he said.
"As the amounts result in a larger and larger balance, you become less reliant on debt to cover the next unplanned expense," Mr. McBride said.
5. Boost your retirement savings. Sign up for your employer's tax-deferred 401(k) retirement plan and have the money automatically deducted from your paycheck.
"That money will be taken out before you even have a chance to spend it," Mr. McBride said.
If your employer matches your contribution, at the very least, make sure you're contributing enough to get the match. If you don't, you're leaving free money on the table.
Even if your employer doesn't match your contribution, it's still a good idea to contribute.
That not only gives you a head start on retirement saving, it also saves you money on your tax bill. Since your contributions are made with pre-tax dollars, your current taxable income is lowered.
Fund your Individual Retirement Account, too.
"March toward retirement security in double-time," Mr. McBride said. "You have until April 15 to make your 2007 IRA contribution, and then start working toward that 2008 contribution. A little bit can mean a whole lot later."
6. Develop a spending plan or budget.
"A budget is like a roadmap," Mr. McBride said. "Decide on a destination, determine the route to get there and monitor your progress along the way."
Until you know where your money is going every month, you don't have control over your finances, and you will be unable to consistently save for the future or make headway on your debt.
Consider tracking expenses for two weeks, so you can identify areas where you can cut back, said experts at Consumer Credit Counseling Services of Greater Fort Worth.
A budget will help you determine whether you're meeting your goals.
"If you figure out that you're able to throw an additional $250 month toward debt repayment, you then you have to hold yourself accountable to make sure that you are indeed throwing an extra $250 a month toward your debts," Mr. McBride said.
7. Check on whether you've covered your insurance needs. Do you have enough life insurance to cover your family, should you die unexpectedly?
Also important but often overlooked: Do you have enough disability insurance to cover you if you can no longer earn a living? That ability is your greatest asset.
Are your health insurance and your coverage for auto and home adequate? What about long-term care needs?
8. Make day-by-day money resolutions. You can say something like, " 'Today, I will not use my credit cards. Today, I will place all of my loose change in a mason jar,' " Mr. Salmeron said.
"Most people know what is good for them and what is not, so use this method to try to reduce the bad things, and enhance the good things one day at a time," he said.
9. Don't let an occasional setback discourage you from achieving your goals.
"Expect a challenge when trying to achieve new goals, but don't give up," said Marianne Gray D'Aquila, president of Consumer Credit Counseling Services of Greater Fort Worth. "Once you have decided what you want to accomplish, be confident. A little discipline can help you enjoy a happy and prosperous New Year."
Take it one step at a time. You can improve your financial situation and meet your goals for the New Year. Don't give up! Keep trying and you can make it.
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