How often have you drawn up an ambitious
list of new year's resolutions, only to find you've given up on
them after a few weeks? Don't let that happen to you in 2010.
If you want to make significant strides toward achieving your
financial goals, determine why your resolutions have failed in
the past and find ways to overcome those obstacles.
We make resolutions because we really want
to change some aspect of our lives. However, the reason we have
to make resolutions is because it is difficult to get these changes
accomplished. Thus, if you want to achieve your resolutions, follow
these tips:
- Put your resolutions
in writing. Doing so will go a
long way in helping you achieve those resolutions.
- Make your resolutions
specific and achievable. Rather
than making vague or very broad resolutions, set smaller goals
you know you can reach. Once you achieve these smaller goals,
you may find it easier to pursue more substantial goals.
- Don't expect perfection. Changing
any behavior is tough, and you should expect that you might slip
along the way. Don't use that as an excuse to abandon your goals.
Shake it off and keep pursuing your goals.
If you're looking to shape up your finances,
consider these resolutions:
- Spend less than you
earn. The amount of money left over for saving is a direct
result of your lifestyle. Since you will typically want to continue
the same lifestyle after retirement, your lifestyle decisions
will impact you now and in the future. To get a grip on your
spending, take time to analyze your expenses and to set a budget.
Try reducing nonessential expenditures to find ways to spend
less money on the same things.
- Save the money before
you see it. If you have to find money every month to save,
you'll probably find there isn't much left after paying all the
bills. Typically, a better strategy is to set up an automatic
savings program where money is automatically deduced from your
bank account every month and directly deposited in an investment
account. Another good alternative is to sign up for your company's
401(k) plan, having funds withdrawn every paycheck. (Remember
that an automatic investing program, such as dollar cost averaging,
does not assure a profit or protect against a loss in declining
markets. Since such a strategy involves periodic investment,
consider your financial ability and willingness to continue purchases
through periods of low price levels.)
- Don't let debt sabotage
your goals. If a significant portion of your income is going
to pay interest on loans, you'll have less available for saving.
Strive to eliminate all debt except your mortgage. Pay cash for
all purchases so you don't incur additional debt. Pay down your
existing debts by using additional funds to pay off the debt
with the highest interest rate. Once that debt is paid in full,
start paying down the debt with the next highest interest rate,
continuing until all your debt is paid in full.
- Invest, don't just
save. The ultimate value of your investment portfolio
is a function of two factors - how much you save and how much
you earn on those savings. Become comfortable with various investment
alternatives, so you'll feel more comfortable investing in alternatives
that offer potentially higher rates of return. Even small differences
in your long-term rate of return can significantly impact the
ultimate size of your savings.
