3 financial resolutions for a happy new year

Jan. 6, 2014, 7:57 PM UTC

By Sharon Epperson

At the start of 2014, you've probably made promises to yourself or family or friends about doing things better than last year — and that includes making better financial decisions.

You are not alone if you are unsure where to start or what your next move should be. Nearly a third of U.S. adults admit their lack of knowledge has led to poor financial decisions, and more than 40 percent acknowledge they've missed out on good financial opportunities as a result, according to a Harris Interactive survey.

About 19 percent of Americans spend more money than they make, and slightly more than a third are just breaking even, leaving little or no money for savings, according to a study by the Financial Industry Regulatory Authority's Investor Education Foundation. Only 41 percent of the 25,000 people surveyed said they spend less than their income.

Making matters worse, many people lack a cushion against unexpected money shocks. In the U.S., 56 percent of individuals lack a rainy day fund to cover expenses for three months in case of sickness, job loss or other emergencies, according to a FINRA study.

When it comes to dollars and cents, just as with diet and exercise, the chances of coming up with a strategy and goals that you'll actually stick to increase significantly when you take time to create a financial plan.

Here are the three New Year's resolutions you should be making.

Manage your money. If you can't figure out how to earn more, spend less, save more and pay down debt, you won't have the assets you need to grow your wealth. From recent college graduates to baby boomers near retirement, learning how to live on less than you make, borrowing money and using credit responsibly, and saving money for unexpected situations are critical steps you must take.

The FINRA National Financial Capability study found that in addition to living beyond their means, more than one-third of consumers with credit cards paid only the minimum on their credit cards during some months in the last year. At the same time, about 14 percent of homeowners owe more on their home than its current market value. Borrowing more than you can afford can have profound consequences on your short- and long-term savings.

Grow your money. When it comes to saving, the earlier you start the better. As you invest your savings, you need to understand the difference between potential profits and probable pitfalls so that you're smart about investing. By investing wisely, you can grow your money to help pay for your child's education, buy your first home or a vacation home, and — this is most important — fund your retirement. Starting early and saving regularly in a variety of aggressive and conservative investments based on your age and risk tolerance can help you grow your nest egg to ensure a more secure retirement.

When you make a big purchase for a car or home, take the time to do your homework. You need to do the same when it comes to investing in yourself for your retirement, said Richard Coppa, a financial adviser and managing director of Wealth Health in Roseland, N.J. There are plenty of opportunities to learn more about how to allocate your investments and take advantage of tax-advantaged plans. "You really have to take the bull by the horns," Coppa said. "No one else is going to be doing it for you."

Protect your money. Getting up to speed on retirement, tax and estate planning methods can be the difference in allowing you to retire on your terms in order to leave a legacy of financial strength for your loved ones. Federal income taxes can be a family's greatest annual expense, underscoring the importance of strategic tax planning. Knowing your tax liability before the annual April 15 deadline is critical to your overall financial plan, Coppa said. Planning can help you save money.

Careful estate planning can prevent confusion, chaos and drama for your family when you're gone. Yet six in 10 Americans do not have a will, including 70 percent of those who have children under age 18 in their household, according to a 2013 survey by Harris Interactive. With no will, families can be divided in their time of grief, with potential court battles over child custody, assets and even memorial decisions.