Starting and keeping your financial resolutions in the New Year

Saving money is a popular New Year's resolution. (Image credit: MGN Online)

The new year is right around the corner, and people are already thinking about their resolutions.

Most resolutions involve getting healthy or losing weight, but according to On-Track Financial Education and Counseling, 34% of people make resolutions related to their finances.

Here are the top five financial resolutions:

  1. Eliminate Credit Card Debt
  2. Improving Credit and Credit Scores
  3. Save More for Retirement
  4. Reduce Monthly Bills
  5. Start an Emergency Fund

Celeste Collins, the executive director at On-Track, says the first step is to take an inventory of your current financial situation.

"The most important thing is to figure out where you stand from a financial perspective," Collins said. "Figure out how much money you owe, what are the interest rates, what payments are you making and are you making those payments on time. Then within your comprehensive financial picture, what's your cash flow like, expenses, are there places you can economize to put more money towards debt reduction?"

Once you do that, start looking for ways to lower your spending or put back some of that cash.

"If you have an installment loan, like a car loan or something like that, that's going to be paid off, instead of spending that money elsewhere redirect that payment to a savings account," Collins said. "You can also also have a yard sale, or sell things on consignment, or Ebay just to generate a little bit of cash."

She also suggested taking a look at your tax deductions on your paycheck.

"Maybe you are over-witholding to get a big old refund but that money might be able to be used better in your monthly cash flow," she said.

On-Track offers these strategies to increase your chances of keeping or reaching your financial resolutions:

  • Make your resolution something you want, not what other people want for you.
  • Be Specific - Determine the amount you will put aside each month and identify explicit changes in behavior you'll make to get there.
  • Make Your Goal Public tell others and find a buddy to keep each other on track and accountable
  • Substitute Good Behaviors for "Bad" - Build in a healthy behavior that's incompatible with the one you want to change. So, if eating lunch out every day runs contrary to your goal of saving money, put together a small like-minded group and commit to bringing your lunch 3 days a week.
  • Track Your Progress - Research indicates that such 'self-monitoring' increases the probability of keeping your resolution.
  • Reward yourself (modestly) for staying on track and achieving your resolutions.
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