Five Good New Year's Financial Resolutions

Christmas can be an expensive time of year, and there is no better time to make a resolution to improve your finances than in the New Year.

New Year's Resolutions are something that most people half heartedly think about, but all too often do little about in practise, but in these days where money is often not as plentiful as we would like, and the cost of living seems to just keep rising, this year more than ever it's important to make some New Year's Resolutions that will help to improve your finances.

#1 New Year's Finance Resolution: Pay Off Credit Cards And Loans

The cost of Christmas can often be more than a family can handle without dipping into their lines of credit, and all too often they realize that the balances on their credit cards are too high to be able to pay off in one month.

That means that whatever balance is not paid off on the credit cards, will attract interest the following month (or months).

A family also might have a loan that needs paying off, which is also attracting interest.

It's important to pay at least the minimum amount on each credit card, and to pay before the due date as well, so as to not incur late payment charges, but it's also important to check the interest rates of the cards, and to pay off the cards and/or loans that have a higher interest rate first.

Often the lending bank will agree to lower the interest rate on a credit card if requested, especially if that means that you will use the card more frequently. Although the best time to make this request is before you start using it with wild abandon, banks will usually still listen once you have a balance to pay off.

#2 New Year's Finance Resolution: Make A Budget

If you are to put your finances in order, the most important thing to do is to create a list of your monthly income and outgoings and to make a budget.

One of the best ways to do this is to use MS Money, Quicken or even MS Excel and to record your financial transactions every month.

This can also be done on paper, but then you need to manually add up the figures, which is tedious. Doing it on a computer allows the software to do much of the work for you.

If like me you pay for most items by credit card or debit card, keep the receipts and enter them into the computer, so you know what your current balance is at any time. Also if you use a program like MS Money or Quicken, use Budget Categories so that you can see how much you are spending in each category.

When you know how much you are spending, then you can look to make a budget, and hopefully your income will be less than the amount that is going out the door, leaving you some left over for other uses.

#3 New Year's Finance Resolution: Reduce Spending

Having made a budget, look at how much you are spending in each category, and try to determine how this can be reduced.

I know that I was amazed at how much was being spent on dining out and fast food every month, and you might be too if you add it up.

Easy ways to reduce spending on food alone can be to (a) stop buying lunches out and make your own, (b) eat less fast food, (c) dine out less, drink sodas when you do instead of alcohol.

Leisure often costs far more than you realize too, so take note of how many movies or computer games you buy or rent, and cutting back can make a significant difference.

In reality there are many ways that you can reduce your monthly spending, and if you are able to do this, then you can begin to make plans for what to do with the money that is saved.

#4 New Year's Finance Resolution: Make A Retirement Plan

All too often we live our lives day by day and don't think about the future, but soon enough it's time to start seriously thinking about retirement, and if we don't begin to put a little aside each year in preparation for retirement, we may have a shock when we begin to think about giving up work.

No age is too early to start planning for retirement, as long as you have money that you can put aside each month, and what may seem like a lot now will almost certainly seem far less in 10 or 20 years time, but if you don't put that money aside, and it is not always easy, there won't be a nest egg for when you need it later in life.

#5 New Year's Finance Resolution: Make A Savings Plan

As well as planning for retirement, if there are sufficient funds left in your budget to save, then it's very important to do so.

There are many good reasons for saving, such as making sure you have money for a vacation, for the children's schools and universities, for a new car, bigger house etc.

With children it's never too soon to open a savings account for them and to start putting money away. By the time they are 18 this can really add up, and might help towards their first car, college expenses, or even wedding.

I hope this has given you some ideas on how to get your finances in order in the New Year, and wish you a Happy, Healthy and Prosperous one.