Welcome to 2012!
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A new year reminds us that we can have new opportunities and new beginnings. We actually can do this any time, but many people make plans at the end of the year to reach personal goals during the following year. Usually termed “New Year’s Resolutions,” these goals can include losing weight and stopping smoking. Another goal that is, not surprisingly, extremely common is to have more money. You could resolve to make more money, but that isn’t always possible, especially in a bad economy. Therefore, I am presenting several examples of potentially effective New Year’s resolutions that you might want to consider setting for yourself.
1. Start with a clean record. A girlfriend of mine applied for a loan to buy a used car for college. She was shocked to learn that someone had stolen her identity and opened credit cards in her name. Even more surprising was the fact that the thief was a male and he consistently had no trouble using the card. If she had checked her credit report a few years earlier, this problem could have been fixed more easily.
Get your free annual credit report at annualcreditreport.com or call (877) 322-8228. If you find any problems in your report, make sure you contact the credit bureaus (http://www.
2. Re-balance your budget. If you were planning on losing weight, you wouldn’t take in more calories than you could burn, right? It should also be obvious that you also cannot save money if you spend more than you make. Take the time to figure out how much money came in and how much you spent in 2011. If you find that you are paying for everything in cash and have no record of what you spent in 2011, begin keeping a record for the next 30 days of what money comes in and goes out. If more money was going out than coming in, re-evaluate what you need versus what you want and cut back appropriately. Cutting out expensive premium coffee every day can help a lot. So can fixing your own meals.
3. Reduce your debt. List all your debts in order of interest rate, from the highest rate to the lowest; or arrange them by the number of payments you have left, starting with those you can pay off most quickly. Once your first debt is fully paid, scratch that debt off your list and go on to the next. Follow this process until all your debts are paid. Paying off the debts with the highest rates first will reduce the number of years you will have payments and will save you thousands of dollars in interest (Steven B. Smith, youngmoney.com).
Remember that the financial habits you develop in high school will likely be with you for the rest of your life. If you find yourself saying you don’t have money to further your education or to buy a home 10 or 15 years from now, it could be because your monthly debt payments are more than 15% of your income. Set a goal to be debt-free by the end of the school year and keep your debt low in future so you are able to save and invest your money.
4. Start an emergency fund. It is surprising how many college students use “payday” loans for their car expenses. These loans have an annual interest rate of 240% to 390% APR. Wouldn’t you like to make this much interest on your savings or investments? If you set aside an emergency fund, on the other hand, this disaster could be prevented.
If you have an emergency fund, great! Add more to it if necessary. If you don’t yet have money set aside for an emergency, begin today, even if you can only set aside a few dollars a week. If you ever have an unexpected problem such as your car breaking down—and this happens to all of us at least a few times in our lives—you will be far more prepared because you have the money set aside (Steven B. Smith, youngmoney.com).
5. Eat out less often. In high school, I was surprised at how many of my friends regularly stopped at fast food restaurants after school. I’ve also been shocked at how many of my college friends buy meal plans for almost all of their meals, but still eat out a lot. If they added up all the money they spent at restaurants a year, it would probably come to a couple thousand dollars. One thing I learned was that eating a healthy snack during the day would help me avoid the temptation to eat out all the time. Not only have my savings prospered, I’ve also been healthier.
6. Reduce your impact on the environment. Think about doing simple things to protect the planet. This could include carpooling to school and using public transportation whenever possible; unplugging your charger as soon as your phone is done charging; turning off the lights after you leave a room; and/or taking a shorter shower. This not only helps the environment, it also helps with your budget.
READERS: We want to know what your thoughts are on our subject...
Have you made any New Year’s resolutions related to your finances? If so, what are they?
Would the above resolutions hinder or assist you with your non-financial resolutions?
What could you do to help make sure you keep your resolutions?
What other money resolutions could you set to help you manage your money better?
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Author:Claire Kimberly, a Ph.D. Candidate in Family Science at the University of Kentucky
Sources: (1) Gerri Willis, “New Year’s (Financial) Resolutions,” CNN.com, 01/03/2007. Retrieved January 8, 2009, from http://money.cnn.com/
(2) Steven B. Smith, “9 Nifty New Year’s Resolutions,” YoungMoney.com, 12/27/2005. Retrieved January 8, 2009, from http://www.youngmoney.
(3) G. E. Miller, “5 Personal Finance New Year’s Resolutions,” 20somethingfinan
(This story originally appeared in 2009.)
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