Two of the most common New Year's resolutions are to be a little thinner and have a slightly fatter wallet. But shedding extra pounds and beefing up your bank account are also the most difficult to achieve. “Today” financial editor Jean Chatzky shares ways to have a more financially sound 2006.
Research shows that some 100 million Americans will make New Year's resolutions over the next couple of days — many of them financial. Unfortunately, research also shows that by the end of January most of those resolutions will have been broken.
Money magazine surveyed more than 1,000 adult Americans and asked them what their top financial resolutions and goals were for the year. Following are the top five, along with suggestions for making them stick. But first, let me offer some general advice about keeping resolutions and other financial goals.
You'll do best if you frame your goals positively rather than negatively (I want to save more money, not I want to spend less money). Also, break your goals into pieces that seem doable, not cumbersome (I want to save $50 a week, rather than I want to save $200 a month or $2,400 a year). And get a buddy to shadow your progress. That way you can cheer each other on.
Resolution: Save more money (33% of Americans)
Make it stick: You can try to save more by nickel and diming your way through life — buying fewer lattes, for example. But the real key here is automatic saving, or using electronic transfers to move money out of your hands before you have the opportunity to spend it. A few ways to do that:
- Increase your 401(k) contributions: Chances are you signed up for a plan when you joined your employer and haven't increased the percentage you're kicking in. It's time to change that. Call your benefits department and bump up your percentage by 2 percentage points. Try to grab all the matching dollars on the table.
- Create your own pseudo-401(k): If you don't have a plan at work, you can still be saving — in a tax-advantaged way — by putting money into IRAs or Roth IRAs or SEP IRAs. Go into your bank and open one of these accounts, then have your bank automatically move money out of the checking account into which your checks are deposited into your savings vehicles.
- Pair the saving with a goal: For goals other than retirement (cars, trips, college), figure out how much you'll need, then set up separate savings accounts — and start automatic transfers into those accounts, too.
Resolution: Get out of debt (23%)
Make it stick: Researchers say that getting out of debt is the financial equivalent of trying to quit smoking. It's not enough to want to do it, you have to break bad old habits and patterns of behavior. How?
- Use cash and debit, not plastic: Figure out how much money you can afford to spend each week, then do so using cash (if you can handle it) and debit (if you can't). The advantage of debit is that you're spending your own money, not some bank’s. Leave the plastic at home.
- Make a plan to pay off your debts faster: Start by making payments that are more than the minimums (minimum payments are designed to keep you in debt for decades). Once you're used to paying double the minimum, then pay 4 times the minimum, then 5, then 6, until your debt starts to truly vanish.
- Increase your credit scores to lower your rates: The better your credit score (you're aiming to close in on 800), the better the interest rate you'll get when you borrow money. Increase your scores by making absolutely sure you pay your bills on time — not late — and by reducing the outstanding debt you're carrying.
Resolution: Get a raise or better job (16%)
Make it stick: In either case, it's not enough to simply do your job well. You have to get other people to notice the good job you're doing. Try the following:
- Look for a niche you can fill: Can you find a way to help your company cut costs? Or be the first to get trained in some up-and-coming technology? Be sure the niche you pick is one valued by your boss, your company or your industry — that way you can take it with you when you make your move.
- Let others know your progress: Once you're on your way, send an email “updating” your boss about the project and how it's going. That's a quiet way of bragging and making sure the higher-ups know of the contribution you're making.
- Write a resume that's numbers heavy: When you start looking for a job outside your company, make sure it includes the fact that you brought something to the bottom line of your last company — and that you intend to do it again.
Resolution: Pay less taxes (10%)
Make it stick: One recent study found that up to 2.2 million taxpayers overpaid the government by an average of $438. Why? Mostly because they took the standard deduction rather than itemizing. Sure, it's easier — but $438 is a lot of money. How can you cut your taxes?
- Document, document, document: In order to itemize, you need documentation, i.e. receipts. Get a large accordion file or a shoebox and throughout this year when you get any document you think might be useful at tax time, toss it in. Be sure to include your real estate tax bill and mortgage interest statement, receipts for charitable contributions and brokerage statements that document stock losses.
- Save more: Yes, this goes back to resolution number one. No move will save you as much on your taxes as funding tax-advantaged savings vehicles and flexible spending accounts.
Resolution: Cut health care costs (9%)
Make it stick: The classic new year's resolution is to lose weight, get healthier. Doing just that will help you lower your out-of-pocket health care costs. You may also want to try:
- Check out the Medicare Drug Plan (Medicare Part D): Enrollment for this plan began November 15 and continues through May 15. Coverage starts as soon as January 1. Yes, picking the right plan is a lengthy and confusing process — but the folks at 1-800-Medicare and medicare.gov are there to help, and participating can save an average $1,200 a year.
- Take advantage of new benefits at work: To keep their own health costs down, a growing number of companies are offering new benefits to keep their workers out of the doctor's office, including free check-ups, behavior modification programs (like smoking cessation clinics), discounts on gym memberships and lower co-pays to the health plan for staying in good shape.
- Once you're healthy, reapply for life insurance and save big: A 45-year-old man who is overweight and smokes will pay $2,500 to $2,700 a year for a half-million, 20-year-level term life insurance policy. A 45-year-old healthy man will pay $650 to $750.
Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today" show and is also a columnist for Life magazine. She is the author of four books, including 2004's "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio). To find out more, visit her Web site, .