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Top 10 Financial Resolutions for the New Year
By Samantha Chang
Now more than ever, it’s important for single women to be financially savvy. Fact: According to the National Center for Women & Retirement, over 80% of women will be solely responsible for their own finances at some point in their lives, either because of divorce or the death of a spouse. So for the new year (in addition to eating better and exercising more), you might want to consider these 10 financial resolutions for putting your house in order.
1. Think strategically about your money
When it comes to vacations, most people plan months ahead, carefully selecting a destination and the best way to get there. Financial decisions should involve the same type of strategic thinking. You should choose a financial “destination” and then map investment, savings, insurance and household needs to arrive as planned. People who think strategically will know if they’re on track to reach their goals and when they need to adjust their plan to match their financial situations.
2. Develop financial relationships
It’s never a good idea to make major decisions in a vacuum. Ideally, you should try to develop relationships with people who can help guide your financial well-being. Get to know them, and let them get to know you. That way, they’re more likely to go the extra mile to provide the kind of personalized service that can keep your goals on track. A good accountant can help you save money. A banker can help with loans when you really need them, and a lawyer can make sure your personal affairs are in order.
3. Boost savings, cut debt
Limiting debt is critical to reaching your financial goals. Therefore, it’s important to keep nondeductible interest to a minimum. As you liquidate debt, you may want to direct those dollars to savings. You can also maximize your savings by contributing to company-sponsored tax-deductible savings programs such as a 401(k), a health savings account or a 529 college savings plan. You should also consider making major household purchases on a “pay-as-you-go” basis. Anytime you reduce debt, you are, in effect, giving yourself a raise.
4. Review household expenses and set a budget
Cash flow management is fundamental to financial planning. Basically, this means spending less than you earn. To do this, you should decide how much you want to save and then adjust your budget accordingly. Try tracking your expenses for three months so you know where your money is going. This way, it’s easier to start making intelligent decisions about spending habits.
5. Plan ahead for marriage and family
You may not have tied the knot yet, but if you do plan to marry someday, you should start planning now. For example, do you and your partner see eye-to-eye on financial matters? Do you know whether you’ll use a joint checking account or separate accounts? How many children, if any, do you plan to have? How will a family change your insurance and housing needs? Financial arguments can frequently dissolve a relationship. By planning ahead, you can help minimize stress on your relationship–whether or not you tie the knot.
6. Review employment and education options
Too many people fail to take advantage of employee benefits, especially when it comes to retirement plans. Most companies match a portion of an employee’s 401(k) contribution. Consider it “free money” or a guaranteed return on your investment. An increasing number of companies also match contributions to college and health savings accounts and provide tuition reimbursement. An advanced degree can enhance your earning potential, so find out if your company can help finance higher education.
7. Develop a crisis management plan
A financial emergency usually strikes when you least expect it. The loss of a job, a change in your personal situation such as a divorce or a health crisis can quickly drain your financial reserves. The best hedge is an emergency savings account equal to at least three-and ideally, six-months of living expenses. Repay the account promptly, even if it means cutting back on other things. The goal is to avoid piling up debt-or worse, bankruptcy. A crisis management plan can provide some peace of mind and keep you moving toward your financial goals.
8. Review insurance needs
You can use insurance to protect your assets. Life insurance can provide a decent financial cushion in the event of a partner’s death. Therefore, you should try to regularly review any policies you have, especially if you’re a mom.
9. Leverage your assets
You can leverage assets to take advantage of financial opportunities. For example, if you have a low-interest mortgage, think about directing any extra cash to higher-paying investments rather than paying down the loan. A home equity loan is usually cheaper than a consumer loan, and interest is tax-deductible. If you have a brokerage account, you may want to consider using it as collateral for a loan. The interest may be lower than your investment return and conventional loan rates.
10. Consider buying a home rather than renting
Home values are at an all time low. If you feel your job is secure and can scrape together the down payment, you will find incredible real estate deals. Lending may be a bit more challenging. So before you start shopping for a home, make sure your credit is in top shape.
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