There could not be a better time to mull over the changes needed in our life
style than at the beginning of a New Year. This is also a good time to set
yearly goals and make resolutions. Each year, according to statistics, almost
a third of us make some kinds of New Year Resolutions. Interestingly, although
financial future is our main cause of anxiety, our personal finance, according
to surveys, gets only to the fifth place in the list of most common New Year
For those of us who are still in the process of making New Year resolutions,
my suggestion is to give high priority to financial aspects.
Here are some resolution ideas that may change your financial future over
the course of time.
Lets make one thing clear! What ever amount of money you make it’s probably
never enough! The way our consumer psychology works is our demand increases
along with our income. This makes saving really a problematic task! Some people
do have inborn ability to save willingly, but most have to force themselves.
If you are one of these people, who find saving a difficult thing, you should
consider the methods described below.
- Commit to yourself that each month you will set aside minimum ten
percent of your income for investment purposes.
- Make a strict habit of depositing 10 percent of all your incomes
directly to your saving account.
- No matter what happens, don’t give up.
You might argue that your income is not enough to make any kind of savings.
Believe me, once you try putting away 10 percent of your earnings, you will
see that this really does not have any serious impact on your budget.
So your first resolution is to save ten percent of all your incomes month
There is hardly any point to save if you don’t put your money to work for
yourself! So, once you resolved to save, you need to invest your money wisely.
Credit cards and other consumer loans
According to New York Times through out the last decade use of credit cards
has increased dramatically. The number of the people having credit cards
raised about 75 percent from 82 million in 1990 to 144 million in 2003.
However, the debt burden that they carry had grown 350 percent from US$338
billion to an astounding US$1.5 trillion. In 2003, according to the same
report, average household carried a debt of US$ 7,520 in comparison to US$2,550
This means that credit card loans are becoming serious problems for average
Joe. That’s why the first step of your investment strategy should be to get
rid of your consumer debts- especially your credit card loans. Most credit
cards have horrendously expensive interest rates – normally, 18 percent and
over. If you are one of those people, who pay only minimum payment amount
each month to their credit cards’ debt, you are making a great mistake. Check
out the calculator at http://www.bankrate.com/brm/calc/MinPayment.asp
to see how much you are loosing by not eliminating your credit card debt burden.
If you are looking for financially sound future, take a hard look at your
credit cards and resolve to do the followings:
- From the savings you started to make, pay off maximum amount of your
credit cards’ debts until you completely eliminate them.
- If you are unable to pay off the whole amount at once, don’t just
pay the minimum amount required; pay out as much as you can over that limit.
- Shop for credit cards with minimum interest rates – which should
not be more than 12 percent – and switch to them.
- Use credit cards strictly for convenience only. Don’t charge to your
credit cards unless you know for sure that you will be able to pay it off
- Minimize the quantity of credit cards you are holding. There is no
reason to have more than three credit cards.
Same goes for your other consumer loans like student, car, etc.
The second step of your investment strategy should be to evaluate your
mortgage payments. There are several very simple ways of reducing your payment
time dramatically. Used scrupulously these methods can lower a 30-year mortgage
to 10-15 years.
- Instead of making one single payment each month, every two weeks
pay out half the monthly payment. The idea behind this is, since you are making
26 payments in a year – each one of them carrying 50 percent of your monthly
payment – this is equivalent to 13 monthly payments. You are generating an
extra month’s payment each year, which in turn will reduce your mortgage term
- Whenever possible, each month try paying ten percent more than you
are supposed to.
- Whenever you manage to make some extra earnings, use a portion of
that to pay down your mortgage.
The mortgage calculator located at http://www.mortgages-loans-calculators.com/Calculator-Mortgage-Payoff.asp
will help you to see your progress.
Keep track of your expenses
If you don’t do it yet, resolve yourself to keep an expense ledger of all
spending. Just the mere act of jotting down all your expenditure will reduce
your expenses up to 20 percent. The reason is when you start keeping track
of the money you spend, you become more careful and discerning in your buying
decisions, which in turn help you cutting back and saving hard earned money.