Although
making resolutions to improve your financial situation is a good thing
to do at any time of year, many people find it easier at the beginning
of a new year. Regardless of when you begin, the basics remain the
same. Here are my top ten keys to getting ahead financially.
1. Get Paid What You're Worth and Spend Less Than You Earn
It
sounds simplistic, but many people struggle with this first basic rule.
Make sure you know what your job is worth in the marketplace, by
conducting an evaluation of your skills, productivity, job tasks,
contribution to the company, and the going rate, both inside and
outside the company, for what you do. Being underpaid even a thousand
dollars a year can have a significant cumulative effect over the course
of your working life.
No matter how much or how little you're
paid, you'll never get ahead if you spend more than you earn. Often
it's easier to spend less than it is to earn more, and a little
cost-cutting effort in a number of areas can result in big savings. It
doesn't always have to involve making big sacrifices.
2. Stick to a Budget
One
of my favorite subjects: budgeting. It's not a four-letter word. How
can you know where your money is going if you don't budget? How can you
set spending and saving goals if you don't know where your money is
going? You need a budget whether you make thousands or hundreds of
thousands of dollars a year.
3. Pay Off Credit Card Debt
Credit
card debt is the number one obstacle to getting ahead financially.
Those little pieces of plastic are so easy to use, and it's so easy to
forget that it's real money we're dealing with when we whip them out to
pay for a purchase, large or small. Despite our good resolves to pay
the balance off quickly, the reality is that we often don't, and end up
paying far more for things than we would have paid if we had used cash.
4. Contribute to a Retirement Plan
If
your employer has a 401(k) plan and you don't contribute to it, you're
walking away from one of the best deals out there. Ask your employer if
they have a 401(k) plan (or similar plan), and sign up today. If you're
already contributing, try to increase your contribution. If your
employer doesn't offer a retirement plan, consider an IRA.
5. Have a Savings Plan
You've
heard it before: Pay yourself first! If you wait until you've met all
your other financial obligations before seeing what's left over for
saving, chances are you'll never have a healthy savings account or
investments. Resolve to set aside a minimum of 5% to 10% of your salary
for savings BEFORE you start paying your bills. Better yet, have money
automatically deducted from your paycheck and deposited into a separate
account.
6. Invest!
If
you're contributing to a retirement plan and a savings account and you
can still manage to put some money into other investments, all the
better.
7. Maximize Your Employment Benefits
Employment
benefits like a 401(k) plan, flexible spending accounts, medical and
dental insurance, etc., are worth big bucks. Make sure you're
maximizing yours and taking advantage of the ones that can save you
money by reducing taxes or out-of-pocket expenses.
8. Review Your Insurance Coverages
Too
many people are talked into paying too much for life and disability
insurance, whether it's by adding these coverages to car loans, buying
whole-life insurance policies when term-life makes more sense, or
buying life insurance when you have no dependents. On the other hand,
it's important that you have enough insurance to protect your
dependents and your income in the case of death or disability.
9. Update Your Will
70%
of Americans don't have a will. If you have dependents, no matter how
little or how much you own, you need a will. If your situation isn't
too complicated you can even do your own with software like WillMaker
from Nolo Press. Protect your loved ones. Write a will.
10. Keep Good Records
If
you don't keep good records, you're probably not claiming all your
allowable income tax deductions and credits. Set up a system now and
use it all year. It's much easier than scrambling to find everything at
tax time, only to miss items that might have saved you money.
Reality Check
How
are you doing on the top ten list? If you're not doing at least six of
the ten, resolve to make improvements. Choose one area at a time and
set a goal for incorporating all ten into your lifestyle.
