Keeping a New Year’s resolution seems impossible by January 3rd, so make a promise instead. These promises emphasize a commitment. And if you promise something to yourself, well, it’s like a little covenant.
When it comes to money promises, most of them are easy to fulfill. You just have to make a list and put them into practice every day.
1. Make More Money on Your Idle Cash. Savings rates have gone up a bit and may go up more if the Federal Reserve sees increased demand for credit. But your local bank should be the last place to shop for higher rates.
Always go online first to get the best-possible savings returns. I recommend you keep an emergency fund in an insured money-market account. That way, if rates go up more, so will your return. A good place to shop is bankrate.com.
2) Get the lowest fees on your investment accounts. This means checking the expense ratios on your mutual funds. You want to know how much a manager is charging on an annual percentage basis.
3). Monitor and Lower Expenses in Your 401(k), 403(b), 457 or IRAs. For this annual tune-up, you’ll need to look at the expense ratios for the funds within your 401(k), including target-date funds. Ask your employer to do an audit and find lower-cost vendors.
4) Open a Roth 401(k) or IRA. These vehicles tax the money going into the account, but allow tax-free withdrawals. There are a few rules. You need to be in the funds for at least five years. Check out the rules here.
5) Diversify! You never know where your growth and income will come from. In the coming year, it may be emerging markets or small-company stocks. Make sure you’re invested in all sizes of companies through mutual funds across the world. That goes for bonds as well.
And don’t forget global real estate. Funds that invest in real estate investment trusts will provide income and growth.
6) Slash Your Debt. The best promise you can make is to pay off your credit card bill when it comes due every month. If you have balances that are rolling over into the next month, you’re paying finance charges that pile up.
Pay off the smaller debts first. When you’re able to save, put money away first before you pay other bills.
7) Focus on Your Goals. The only thing I know for sure is that the markets and political climate will be volatile. Ignore the headlines. Write down your goals and stay focused on how to get there.
Are you saving for a car or fixing your roof? Do you want to retire by a certain year? That’s what you should be concerned about. Regular savings and investing is the way to go. It’s more than a resolution, it’s a promise — and gift — to yourself.
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