A New Year’s Resolution to Last a Lifetime

December 27, 2011 — While most people are making New Year’s resolutions to exercise more and eat less, consider committing yourself to making 2012 the year you shape up your finances.

Trim Debts

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.

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