CCCS of Greater Atlanta advises consumers to top their list of New Year's resolutions with a commitment to improve their financial outlook. To help consumers tackle what can be a stressful time, CCCS suggests following the following tips:
1. Know how much you owe. A common mistake is not keeping track of debt. The thinking is that as long as you can keep up with the payments, everything is fine. However, if circumstances change due to a layoff or other unexpected event, you could find yourself unable to make payments and in immediate financial stress. The only way to understand what you are facing is to have a realistic picture of what you owe. Gather all your credit card statements and other bills and add up the total.
2. Create a spending plan. The easiest way to take control of your money is to set out a plan for how you will spend it. This is not glamorous and can be something of a task, but it gives you the power to decide where your money goes. The plan should be flexible and include monthly expenses such as mortgage or rent, utilities, food, transportation, entertainment, clothing, etc. Make sure your expenses are not more than your income. If they are, go back to the plan and make adjustments.
3. Pay off credit card debt. The average household has more than to $8,300 in credit card debt (Nilson Report, April 2009) and the interest paid on those balances can be as high as $1,500 a year. Just think of what you could do with an extra $125 a month in your budget! Stop charging additional purchases today and make a commitment to yourself that once you have paid off your debt, you will not charge any purchases unless you have a plan in place to pay off the balance in 90 days or less. Sacrifices now will mean less stress and a better financial future.
4. Build a savings cushion. Once you have paid off your credit card balances, you should begin to build a savings cushion for emergency or unexpected expenses or if you lose your job. Your goal is three to six months of living expenses put aside in a savings account. With this cushion in place, when the refrigerator stops working, your car's transmission gives out or your mother-in-law moves in, you will not have to put those unexpected expenses on a credit card.
5. Develop a strategy for your financial future. Set aside time at least twice a month to manage your finances including paying bills, balancing your checking account and analyzing your expenses. Begin thinking about, and planning for retirement - consider when you would prefer to retire, how much money you will need to live the lifestyle of your choice and what you need to do now to get there. Establish a retirement fund and contribute to it on a regular basis.
