Top 5 New Year's Resolutions for Your Finances
Each year, the most popular New Year's Resolutions usually alternate between losing weight and getting one's finances under control. With all the attention on the dire state of the economy, getting fiscally fit will most likely not only top next year's resolutions, but also create a bigger challenge than ever to accomplish.
Ring in the New Year on the right financial foot with these 5 essential tips from Dara Duguay, Director of Citi's Office of Financial Education, to help get your finances in shape:
1. Don't treat money as a taboo subject. Whether managing finances yourself or with a spouse/partner, avoiding money issues in the hopes that they will just go away or until you have a financial crisis only guarantees stress and arguments. Set aside time every month - or schedule regular monthly "money meetings" with your partner - to review the bills, progress towards your money goals, investment portfolio, college savings and any other money topic that is relevant. This monthly review could coincide with bill paying or when your bank statement arrives.
2. Create an emergency fund. Emergency savings are, in effect, a form of insurance. It will protect you from life's curveballs catapulting you into a financial crisis. So open a savings account and don't stop contributing until you have saved enough to cover at least three months of monthly expenses. If you can save six months worth, even better. This will prevent you from having to take cash advances, which while helpful in emergencies, come with fees and interest rate charges that are usually higher than your credit card purchases. Use cash advances with discretion, and don't use them to fill gaps in your income or savings. Having an emergency fund will give you peace of mind.
3. Pay more than the minimum on your credit cards whenever you can. Even a small amount more than the minimum can make a big difference in the time it takes to pay off your balance and the total cost of interest. Also, be sure to make your monthly payments on time, every time. Even one late or missed payment can be recorded in your credit report and affect your credit history.
4. Contribute the maximum to a retirement savings plan. Approximately 50% of Americans who have the opportunity to contribute to a company retirement plan, choose not to. In many cases, contributions are matched by the company. This is free money that is being thrown away by opting out. Remember that your contributions will reduce your taxable income and will only be taxed when you start to withdraw them at retirement age.
5. Make sure you have adequate insurance protection. There is nothing like an emergency to wipe out your savings or add to your debt level. Protect yourself financially from as many emergencies as possible by ensuring adequate insurance for health, life, auto and home. Confronting these issues can be difficult since no one likes to think about possible illness or death, but to assume you are invincible from "life events" or tragedy is to not be realistic about life.
Personal finance expert, Dara Duguay, is a dynamic interview. Author of three popular books, The Citi Commonsense Money Guide for Real People, Please Send Money and Don't Spend Your Raise, and currently director of Citi's Office of Financial Education, Dara also served as executive director of the non-profit Jump$tart Coalition for Personal Financial Literacy. Her extensive media experience includes: The NY Times, Associated Press, LA Times, USA Today, Money, Redbook, CNN, Fox News Channel, Bloomberg, MSNBC, NPR, among others.