If your finances make you feel like you're heading toward your own fiscal cliff, check out these New Year's resolutions and finance tools from certified financial planner Dan Keady, director of financial planning at TIAA-CREF. Next thing you know, you'll be managing money like a pro.
1. Stick to a budget and avoid running a deficit. How to budget money? Pay down your debt and make a detailed budget plan, advises Keady. First step: a family meeting. "If you're running the meeting, make sure you've done your homework. Figure out where you were financially on December 31 last year compared to this year." Consider retirement account balances, credit card debt, college savings and the like. Have you started or added to an emergency fund? Have you lowered your taxes by putting money into a 401(k) or other tax-deferred plan?
What makes a good budget? You'll discover it by tracking what you're spending. If you don't do this, start now. "When people do this, they really find out where the money is going. That's step one. Then figure out your savings. Are you saving, say, 15% of after-tax take-home?" Keady says.
"You have to decide whether you're spending on things you enjoy or don't enjoy. My cable bill was $100 plus, and my wife and I never even watched TV. Switching to basic cable was an easy $70 a month savings. On the other hand, we still go to plays because my wife and I enjoy it," Keady says, adding that cellphones are a notorious drain on finances. "People pay $100 a month for an iPhone. You can save a fortune on that."
2. Review all insurance policies. Check to be sure you're getting the coverage you want. Ask yourself: Am I getting the best rates? Am I adequately covered? Make sure you are prepared in the event that you need it. "The first thing to check is the beneficiary on your life insurance. You wouldn't believe how may times people still have listed a parent who's dead or an ex-spouse." Go through your home owner's insurance, spending time with your agent if need be. Does it still make sense? Keep a file of changes and endorsements that arrive through the year; read through that file and check them out. Insure that the dollar amounts make sense in terms of property value. Are you comfortable with the deductible. Same thing for your car ensurance. If you have a healthy emergency fund, savings, go with higher deductible if it offers a big savings on premiums. Eliminate duplicate coverage. Call around for rates to make sure what you're paying is reasonable.
3. Set financial goals for the year. Pick a few financial goals to improve on – such as paying down debt or saving for college. Realize you can't tackle everything at once. Start small and then approach other goals over time. If you set 10 goals, yours odds of success are about zero. The most obvious one is if you're having trouble with finance is learning how to budget money. Put a date on the calendar every month to review spending. Never pick more than three goals. Number two may be a savings goal like saving for college or paying down debt. Remember to attach s timeframe and dollar amount to each goal. Say I'm going to pay off $10,000 credit card debt by September 30. Otherwise, the odds are not good that you'll hit the goals.