'Tis the season for reflection, prospection and a few New Year's resolutions intended to make next year a better one. For some of us, losing weight and exercising are perennial favorites, carried over automatically from every prior year. But here are a few simple financial resolutions that are readily adopted and that can have a major impact on your retirement and your sense of fiscal well-being.
* Set some goals. Chose one or two specific objectives that you would like to accomplish in 2012, and write them down. Then outline the steps required to progress toward your goals and get started. Perhaps you are ready to knock down some credit cards, step up your gifts to charity, set up a college savings fund or simulate some hypothetical retirement scenarios. Establish a couple of goals to achieve this year, record them, and create a plan to get them done.
* Pay down some debt. Even a small reduction in indebtedness repeated year over year can produce
dramatic results.
The next 10 years will be all about reducing the average debt burden on U.S. families, and the laggards in this deleveraging trend will experience substantially lower standards of living in retirement and higher levels of stress and anxiety.
Identify at least one credit card or loan account, paint a red circle on its back, and blast away until it is obliterated.
Set an achievable goal, and then focus relentlessly on it until it is completed.
This is one of the most important things you can do to improve your quality of life in retirement.
* Make extra mortgage payments. If you are debt-free except for your mortgage, consider making additional principal payments to speed up the process of amortizing your home loan.
Even relatively small additional payments make a big difference, since they are typically applied directly to reducing principal.
Not only will you pay less in interest, but you will hasten the day on which you own the house free and clear.
* Create a budget. (Groaning acknowledged). A few peculiarly organized and results-oriented people are already way ahead on this one.
But for the rest of us, the process of budgeting can be drudgery.
It need not be.
Don't focus on too much detail, especially at first. Avoid the temptation to subdivide income and expenses into too many minute classifications.
Estimate next year's expenses, allocated to a few major categories. Include an entry for discretionary expenditures like entertainment and travel, then match your expenses to your projected income.
If your plan does not include a specified goal for savings, review the expenditures and rework as necessary. If sacrifice is indicated, embrace it.
Relearning the joy of delayed gratification can be an intoxicating experience once the results begin to multiply.
* Expect success. Be sure that the steps you have outlined are achievable, and then get to work. Hitting even small incremental goals reinforces your resolve to keep moving ahead and catalyzes the next round.
Here's to a more prosperous and less indebted New Year.
Get answers to financial questions on Wednesdays from our columnists who work in the financial services industry. Christopher A. Hopkins CFA, is a vice president at Barnett & Co. Submit questions to his attention by writing to Business Editor Dave Flessner, Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by emailing him at dflessner@timesfree press.com.