Excess debt is one of the biggest obstacles in financial planning. For instance, you may have $5,000 in a certificate of deposit earning 6 percent, but if you owe $5,000 to credit cards at 15 percent interest, your cost savings are still 9 percent in the red. Consider paying off your high-interest debt by transferring it to a lower interest loan until the amount is paid off.
One of the best loans to use for debt consolidation is a home equity loan or line of credit. You can not only get a low interest rate, but the interest you pay on a home equity loan is most likely tax deductible.
Set Your Financial Goals
Just as a builder must use blueprints to construct a building, you need to follow an investment plan in order to build your nest egg. Your plan should include both short- and long-term goals. Short-term goals focus on more concrete objectives, like investing $100 a month in a mutual fund. Long-term goals relate to more abstract objectives, such as saving enough to retire when you are 55.
Treat Your Savings as a Bill
Most people pay their bills and save what’s left over. That strategy is fine, as long as there is something left over. A better system is to regularly save or invest a portion of your money every payday. Even better, many employer-sponsored 401(k)s make your investments automatically. Or, you can put a portion of each paycheck into a savings with direct deposit.
Making a few small changes in your finances in 2012 may add up to big savings for you down the road.