Take a minute to exhale. The Holiday Season is almost over. Thanksgiving—check. Christmas—check. New Years—Ugh! Another New Year and we feel compelled to make some type of resolution that will radically change our bottom line or our waist line. With only 8% of us actually meeting our resolutions from last year, it is no wonder that there is often a sense of dread about New Year’s Resolutions.
A guaranteed way to jump that to a 92% success rate is to keep your financial resolutions simple and attainable. Here are straightforward financial resolutions that you can make and accomplish even before Punxsutawney Phil lets us know if we will have 6 more week of winter.
Payroll Deduct for ‘Pay Later’ Expenses
Many financial resolutions start with some type of savings goal. This resolution isn’t about saving, it’s about planning for and managing those expenses that don’t happen every month but definitely can be expected. These expenses include car repairs, home maintenance, out of pocket medical expenses, gifts, and travel. Although they may not occur every month, they tend to be larger expenses when they do sneak up.
Your first step to accomplish this resolution is to estimate about how much money you spend on these type of expenses throughout the year. Take that amount divided by your total number of paychecks per year. Now setup an automatic payroll deduction into a separate ‘pay later’ account and wait for a tire to blow! You will have the money set aside to cover that expense and won’t have to use a credit card to pay for it.
Abandon the $5 habit
Here is a simple math equation—
$5/day times 30 days/month = $150/month!
That $5 a day coffee, pastry, or lotto ticket expense is preventing you from having $1,800. Take a minute to picture all the things you could do with $1,800– a trip, a few car payments, pay down a credit card, or finally have the comfort of money in savings.
Okay—maybe it would be difficult to resolve to abandon the coffee altogether—so try to cut it down to just once a week. That still saves you $1,560 from what you were spending with the daily dose of $5 coffee, and you still get to see your favorite barista weekly!
Examine the State of Your Student Loan Borrowing
With high unemployment over the past few years, many of us have gone back to college or are helping our kids afford the ever increasing cost of higher education. The New Year is often the start of a new semester and student loan borrowing is at the forefront of how most of us pay for college. Make a resolution to really look at your full student loan picture or how much student loan debt you have co-signed for your kids. Visit this great calculator for information on how big of a salary you will need after college to support your student loan debt.
Make a resolution to not borrow more than what you will need to cover tuition and books. Try to limit the amount of overage you take and make sure that you are not using that overage to pay off other debt. That is just juggling debt and not actually repaying anything.
Take Action to Reduce Debt Today
Those Christmas expense credit card statements will be arriving in your inbox or mailbox in the next couple of weeks. Instead of just clicking the ‘pay minimum payment’ box really review your statements. If you are only making the minimum payment how long will it take you to repay the debt? That information is now included in your statements. I recently was shocked to see a credit card statement with an $817 balance that showed it would take 14 years to repay the debt. That puts the debt still being paid until 2026! Rewind 14 years and your back in 1998. Can you imagine still paying an $817 debt from when President Clinton was in the White House?!
Set a resolution to get started today on-line through LSS Financial Counseling or give us a call at 877.577.2227 to setup an appointment. We will help you with a plan and timeline for when you can be debt free—probably even before President Obama is out of the White House!
Author Cherrish Holland is a Certified Financial Counselor with LSS. Have questions? Email us!