Your New Year's Resolution is to be better at managing your money. But that's a vague, ambiguous goal.
What specific steps should you take? What does "better" look like in practice? Here are some actionable resolutions that can help you take control of your finances in the New Year.
1. Budgeting Resolutions
Find a system that works for you. If budgeting feels like a chore or a struggle, you'll have a tough time sticking to your plan. Chose a budgeting strategy that fits your personality.
If you hate tracking your expenses, try a free online tool like Mint.com that automatically tracks your spending for you. If you're self-employed or you have irregular income, you may find that a more robust budgeting program like You Need a Budget works best for you. If you're a visual person or you don't like spending too much time staring at a computer screen, the old-fashioned envelope system could be a good fit. The key is finding a method you find easy to use.
Reduce (or cut) one area. To free up money for other goals, like savings, identify one budget area you can focus on drastically reducing, or even cutting out altogether, this coming year. You could aim to cut your entertainment budget in half, live without cable TV or drop to a lower cell phone plan.
Set regular family budget meetings. Even if one person in your family is the "budget master," resolve to have weekly household meetings where you sit down and discuss what expenses are coming up and how you plan on covering them.
When everyone is on the same page, it's easier to stick to your goals. It also takes some pressure off the budget master.
2. Saving Goals
Increase savings by X percent. Set a New Year's Resolution to increase savings by 12 percent in the coming year. Notch up your savings by one percent per month until you get there. In January, for example, increase your savings rate by one percent. In February, increase it by one more percent. In March, add a third percent. You won't feel the pinch if it's gradual, and by the end of the year, you'll have come a long way.
If that's too aggressive for you, you can resolve to increase savings by 6 percent over the span of the next year, at a rate of 0.5 percent per month.
Bank any windfalls. Decide now that any sudden cash that comes your way -- whether it's a bonus, a rebate check or birthday money from your Great Aunt Sue -- will be put directly towards one of your savings goals.
Save more for your kids' education. The price of college isn't getting any cheaper, and today's graduates leave school with a whopping $29,000 in student loan debt on average, according to the nonprofit Project on Student Debt. Save your kids from this fate by increasing your contribution to their education funds this year.
Build up 6 months' income in your emergency fund. Experts recommend you save 3-6 months' income in case of emergencies. Err on the safe side of that spectrum by resolving to reach 6 months' income in your emergency fund this year.
Create a savings fund for short-term goals. Buying a new car, taking a family vacation, even putting aside spending money for the next holiday season... All of these things take money that isn't planned for in our usual monthly budgets. Start a savings funds now so you can cover these expenses in cash and avoid taking on unnecessary debt.
3. Paying Off Debt
Pay off your highest-interest credit card. Throw every extra dollar towards the card that has the highest APR. Get aggressive -- slash a budget category, sell some unwanted stuff, take on a second job temporarily. When that card is paid down, move to the next-highest-interest card to keep the positive momentum going.
Avoid taking on new debt. Put your credit cards in a drawer, freeze them in a block of ice in your freezer, do whatever it takes to avoid adding anything extra to your current balances. Practice the 30-day rule on any large purchases -- wait 30 days before buying something and see if you still want the item once that period is over.
Contact a reputable credit counseling service. If you're in over your head and need help digging out, seek the advice of a legitimate, reputable credit counseling service. The National Foundation for Credit Counseling, a nonprofit group, can help you find a service that's right for you.
4. Retirement Planning Resolutions
Know how much you'll need. The amount you'll need to retire comfortably depends on a variety of factors -- your standard of living, your medical needs, whether or not you'll receive a pension. Use an online calculator or sit down with a trusted financial advisor to get a clear idea of precisely how much you should be aiming to save for your retirement. It will be hard to know if you're on track if you don't have a clear goal in mind.
Replace 70-85 percent of your current income. While a personalized plan is the way to go, a good rule of thumb to start with is to aim to replace 70-85 percent of your final income. If you're not on track to have at least that much saved by your retirement age, it's time to step up your game.
Bump up your monthly retirement contributions. Increasing your savings by just 1-2 percent per month can have a large impact on how much money you'll have when you retire. It may not feel like that much of a sacrifice to you on a monthly basis, but thanks to compound interest, it will feel like much more when it's time to retire. Many people need to catch up on retirement planning, and using a resolution is a great way to get going.
Get professional help. Retirement planning can be confusing. If you're having trouble working out the numbers, or you're worried you may have missed something, meet with a trusted financial advisor who can help you work out a plan that's right for you.