Financial ‘resolutions’ not just for New Year’s

By the summer, many of us have forgotten about our New Year’s Resolutions. We’ve either successfully lost those 10 pounds, or given up until next January. But you still have several months to make good on your pledges, and a whole lifetime to reap the rewards.

Not surprisingly, many resolutions involve money issues, whether it’s sticking to a budget, curbing spending or paying off debt. You can achieve all these goals with careful planning, realistic expectations and hard work.

Make a budget and stick to it. You’d never expect to run a business successfully without adhering to a budget, so why should your personal life be any different? It all boils down to how much money is coming in versus how much is going out. If the outgoing exceeds the incoming, you won’t be able to overcome debt, much less get ahead and save for the things you really want. Here are a few tips:

• When calculating monthly expenses, don’t forget the small things. Spending $3 a day on lattes adds up to over $1,000 a year.
• Remember to include larger, infrequent expenses like auto or homeowners insurance and car maintenance.
• Many tools are available to help with budgeting: Money magazine’s Web site features a step-by-step guide called Money 101 to help you set financial goals. Visa Inc. also sponsors a free personal finance site, Practical Money Skills for Life, www.practicalmoneyskills.com, where interactive tools help you track expenses, set up a livable budget, calculate retirement income needs, and more.

Change your spending habits. Think about bringing your lunch to work a few days a week, consolidating errand trips to save gas, and trying generic brands instead of premium labels. The Practical Money Skills site has a section called Smart Shopping with tips on everything from shopping for a used car to spotting telemarketing fraud.

Some habits die hard, but are worth the effort to quit. For example, if you smoke a pack of cigarettes a day at $4.50 a pack, that’s over $1,600 a year. By investing that same money (assuming an 8 percent annual rate of return), after 15 years you’d accumulate more than $45,000 – and you’d have taken care of another resolution to boot.

Pay off debts. Resolutions often fail if guilt is the motivating factor, so don’t dwell on how you got into debt – concentrate on how you’re going to get out. Try these tips:

• Always pay more than the minimum amount due on your loan or credit card bill. This will slice the time it takes to repay the loan and will save you money by cutting the total interest payment.
• Look into consolidating debt from higher interest rate cards onto one with a lower rate. Several Web sites let you compare credit card interest rates and other features, including www.bankrate.com. Just be sure to examine all the terms: Sometimes low rates apply only during an introductory period, or additional fees may drive up the overall cost.
• Consider using part of your savings to pay off high-rate card balances – just be sure to leave enough savings for emergencies.

As with all resolutions, reducing your debt and boosting saving isn’t easy. But the payoff is well worth the effort.