JERSEY CITY — With 2010 drawing to a close and New Year’s Eve right around the corner, consider making a different resolution this year. Since getting out of debt and improving your financial situation is perennially atop the list of most popular New Year’s resolutions, make 2011 the year you finally whip your finances into shape.
“The New Year is a great time to re-evaluate your current financial situation and make adjustments when it comes to sticking to a budget and getting rid of debt,” said Chris Martin, president and CEO of The Provident Bank.
Here are seven simple resolutions to help put your best financial foot forward in 2011:
1. Prioritize your goals
It isn’t enough to say, “I want to save more money,” or “I want to pay down my credit card.” Have clear, specific financial goals for the year. Identify and write down your objectives, come up with a timeframe and plan for achieving them. At the end of the year, you can evaluate your progress.
2. Make a budget
Review your monthly expenses and establish a budget that’s realistic. Most importantly, stick to it. There are many free resources available online, like Quicken or Mint.com, that automatically keep track of your spending and alert you when bills are due, which makes it an easier resolution to keep.
3. Pay Down Debt
Becoming debt-free is the most important financial resolution you can make. Carrying a lot of credit card debt will hurt your ability to get approved for a loan or receive more favorable rates. Remember, not all debt is created equal, so consider prioritizing your debt. Always begin by paying down the debt that carries the highest interest rate, which is usually a credit card.
4. Commit to saving
Once you’ve addressed any debts you have, consider setting up an automatic savings plan. Automating the process is the easiest way to accumulate savings because the money goes straight into your savings or investment account before you can touch it. Remember, you’re not just saving for your goals – you should have money set aside in case of emergencies, too. While most experts suggest having three to six months worth of expenses available, given the uncertain economy, nine months to a year is probably more realistic.
5. Contribute to your 401(k) or IRA
This advice applies to people of all ages. If you have not begun planning for retirement, now is the time. For example, contribute to a 401(k) if your employer offers one. If your employer offers matching contributions, try to contribute the maximum amount (if you don’t take advantage of this, you are turning down free money!). You can also open an IRA with your local bank. Remember, it’s never too early to start planning for the future.
6. Investigate your investments
If you haven’t paid close attention to your investment accounts, get back on track in the New Year. Make sure you review all of your account statements carefully each month. If you have a financial planner, it’s a good idea to meet with him or her regularly to review your investments from 2010, plan and make adjustments for 2011.
7. Boost your credit score
Having a healthy credit score is one of the most critical parts of being financially stable. The higher your score, the more likely you are to get approved for a loan and receive more favorable rates. It can affect many things in your life –such as purchasing a car or getting approved for a mortgage. Before working to improve your score, make sure all the information in your credit report is accurate and correct any errors you find. Then, make sure to pay your bills on time. Payment history is the single largest factor in determining your credit score. Also, make sure to keep an eye on how much of your available credit is used on an ongoing basis. A good target is to use 20 percent or less of your available credit – having credit cards that are at or near your limit will negatively impact your score.
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