By: Thad Ismart
At the beginning of every year, many of us make resolutions to become healthier and to have a more active lifestyle. However, often very little time is given to address our financial lives. Financial goals can be best achieved if they are written down on paper, are specific, and include a time frame in which they should be completed. The following are five of the top financial resolutions you should make for 2014.
Create an emergency fund
Many people do not have enough cash in reserve to get by for two months, in case of unemployment or an emergency. They rely on retirement accounts, friends or relatives, credit cards, and other forms of debt to pay for expenses and bills. Depending on your situation, you should have on hand the equivalent of between three and six months of expenses in a savings or money market account.
Create a plan to eliminate your credit card debt and other high-interest debt. You should delay any major purchases until you can pay for them with cash. If you have discretionary income, it should be directed to pay off debts with the highest interest rates first.
Increase your retirement savings
Many people are not saving enough for retirement. You should be saving at least 10%- 15% of your gross annual income for retirement each year. As your income increases, the amount you contribute to your retirement plan should increase as well. For example, if you receive a 3% raise, then increase your retirement contribution by 1%. In addition, you should at least contribute enough to receive the full employer matching contributions in 401(k) or other retirement plans.
Protect your credit score
Your credit score can come into play in many important stages of your life such as renting an apartment, applying for a loan, and even applying for a job. You can improve your credit score by keeping your debt balances low and paying them off every month.
You should review your credit report at least annually for errors and be exceptionally careful when sharing confidential information online. Lastly, take precautionary measures to secure your hardcopies of sensitive materials in your home and shred any sensitive material that is not needed.
Many people do not have their legal documents up-to-date or even get them completed in the first place. Make a resolution to complete (or review) your estate documents in 2014 to make sure your assets pass as you intend and that they support your wishes. In addition, review your beneficiary designations on your retirement accounts and insurance policies to make sure they match your wishes for your family and estate, as beneficiary designations will override your will.