By Andrew Housser
Close to half of Americans are resolving to do better financially in 2013. Most want to focus on saving money for long-term goals, such as education and retirement, or for short-term goals like emergency funds. Nearly 20 percent are resolving to spend less and to pay off debt. If you are among those who want to focus on making financial gains, follow these suggestions to ensure that 2013 is a robust year.
1. Assess your financial situation.
Take a look at your last three months of credit card and bank account statements to get an idea as to where your money is going. Subtract your regular monthly expenses (mortgage or rent, utilities, groceries and credit card bills) from your monthly income (wages, child support and other sources of revenue). Use this information to create a monthly budget and figure out what expenses you could cut. Good places to start are with your daily latte, cable TV or dining out.
2. Check your credit reports.
You are legally entitled to free credit reports every 12 months from each of the three major credit bureaus: Equifax, TransUnion and Experian. You can request these reports online or via their toll-free numbers, or via annualcreditreport.com. Consider spacing out the requests throughout the year as a way to monitor future changes. You may want to check reports more often if you have been a victim of identity theft or fraud in the past, or have any other concerns. If you are planning to make a major purchase this year, such as a house or car, now is the time to fix any errors that could hurt your credit rating.
3. Devise a debt payment plan.
The "snowball" method of debt payment involves paying as much as you can toward your smallest debt while making minimum payments on all others. Once the smallest debt is gone, you add the amount that you were paying on it to the minimum you have been paying on the next-smallest debt -- until it, too, is paid off. Repeat this process until you are debt-free. This method gives you a sense of accomplishment because you can see your efforts to wipe out debts. However, if you are carrying debt with sky-high interest rates, it is sometimes smarter to apply the higher payments to these debts (the "avalanche" method). You also may want to look into consolidating your credit card debt with one creditor. Moving debt to one card can make it easier to manage payments. Just make sure your credit balances do not rise above 50 percent of your available limits or else your credit score may take a hit.
4. Commit to savings.
Start considering savings a "bill" that you must pay -- to yourself. You should ultimately aim to save enough to cover six to nine months of basic living expenses. Start small and work toward this gradually. Remember that these funds are only to be used for unplanned, major expenses like a health crisis, home repairs or unemployment. Figure out the minimum amount you can contribute to a high-interest savings or money market account -- perhaps $50 to $100 a month -- after living expenses and debts are covered, and do so regularly.
5. Don't shortchange your retirement.
If possible, max out your retirement fund contributions. At the very least, make sure you are contributing enough to get your company's full matching contribution if it offers that benefit. Consider taking any percentage salary increase that you earn each year and increasing your retirement plan contribution by that percentage.
6. Get your estate in order.
Half of Americans with young children, and 40 percent of those ages 55 to 64, do not have wills. It is all too easy to put off this task, but doing so could jeopardize all that you have worked for as well as the future of your loved ones. You do not need an expensive lawyer to make your final wishes legal. Online companies such as LegalZoom.com and BuildAWill.com provide do-it-yourself kits for fees ranging from $20 to $70.
Reaching financial goals can be challenging. Setbacks happen, but that is no reason to throw in the towel. Maintain your focus and you will soon enjoy the peace of mind that comes with financial security.
Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.